Written Proof
Cases
Mehta v J Pereira Fernandes SA
[2006] EWH 813 (Ch)
His Honour Judge Pelling QC:
“Introduction
Was The E Mail A Sufficient Note Or Memorandum?
The e mail relied on contains an offer. That this is so is apparent from the opening words of the operative part which starts with the words ” …I would be grateful if you could kindly consider the following. If the hearing of the Petition can be adjourned … subject to the following …” . It is also apparent from the fact that the e mail contemplates that formal documents will be entered into by the use of the phrase “… pending the signing of the Personal Guarantee”. It is clear from the evidence of Ms Albaster that it was regarded as such – see the part of Paragraph 7 of her witness statement referred to in Paragraph 4 above.
As a matter of first impression, such a document ought not to be sufficient to constitute a memorandum for Section 4 purposes. I say this because what has to be signed under Section 4 is ” … the agreement upon which such action shall be brought or some memorandum or note thereof …”. As Cave J said in Evans v. Hoare [1892] 1 QB 593 the effect of these words is that ” … there must be a memorandum of a contract, not merely a memorandum of a proposal …”. However, that is not the way the law appears to have developed. I was referred to the current edition of The Law of Contract by Sir Guenter Treitel. At page 184 he says “… an offer signed by one party and orally accepted by the other … ha[s] been held sufficient”. That this is the current state of English law is acknowledged (in relation to the old law under Section 40 of the Law of Property Act 1925) in Paragraph 4-027 of Chitty On Contract (29th Ed., Volume 1), where however it is described as “exceptional”.
Four cases are cited by Chitty in support. Of those, only Lever v. Koffler [1901] Ch 543 was cited to me by Mr Aslett. That case was concerned with an offer in writing by the Defendant to sell two parcels of real property on alternative bases, where one of the alternatives was accepted both orally and by letter by the Plaintiff. In that case, there were two grounds on which it was submitted that Section 4 was not satisfied – first that the reply letter did not define which alternative was being accepted and secondly that the letter from the Defendant did not sufficiently set out the terms of the agreement. The first point failed as a matter of construction and the latter argument was rejected by reference to an earlier judgment of the House of Lords (Hussey v. Horne-Payne 4 App.Cas. 311) in which it had been concluded that an exchange of letters which together constituted a binding agreement would satisfy the requirements of Section 4 as it then applied to contracts for the sale of land. Neither Lever v. Koffler nor Hussey v. Horne-Payne addresses the issue of written offers orally accepted and neither considers the position in relation to guarantees. However, there is a high level of commonality between the treatment of contracts for the sale of land and guarantees under Section 4 as it stood when those cases were decided and so I am not persuaded that this last point assists Mr Mehta.
The position in relation to written offers accepted orally was considered in the latest of the cases cited by Sir Guenter and in Chitty – Parker v. Clark [1960] 1 WLR 286. That case concerned a written offer that was accepted in writing by a letter that was lost. Although it was recognised that oral evidence of the written acceptance might provide an answer, the case was argued on the basis that the written offer was a sufficient memorandum – see the Judgment at 295. The argument that the statute required a concluded agreement to be existing when the memorandum was signed was rejected by Devlin J as he then was. He held that a written offer is capable of being a memorandum providing the language shows an intention to contract as opposed to being a mere statement of expectation. Devlin J relied on two earlier authorities, neither of which was cited to me. I have not been able to obtain copies of either in the time available to me. However, each is referred to in Chitty at footnote 126 to Paragraph 4-027. They are Smith v. Neale (1857) 2 CB(NS) 67 at 88 and Reuss v. Picksley (1866) LR 1 Ex. 342.
Cave J’s observation which I have referred to in Paragraph 12 above was not cited to Devlin J. Although it would appear that Cave J made the observation he did without the citation to him of Smith v. Neale (1857) 2 CB(NS) 67 at 88, Reuss v. Picksley (1866) LR 1 Ex. 342 was cited to him – see the argument in Evans v. Hoare (ante) at Page 595.
Given that nothing has been formally cited to me other than Lever v. Koffler, identifying some generally applicable principle is not easy. The purpose of the statute of frauds is to protect people from being held liable on informal communications because they may be made without sufficient consideration or expressed ambiguously or because such a communication might be fraudulently alleged against the party to be charged. That being so, the logic underlying the authorities I have referred to would appear to be that where (as in this case) there is an offer in writing made by the party to be bound which contains the essential terms of what is offered and the party to be bound accepts that his offer has been accepted unconditionally, albeit orally, there is a sufficient note or memorandum to satisfy Section 4. I say nothing about the position where there is a dispute as to whether or not the written offer has been accepted orally. Such a situation does not arise on this appeal. In the result, subject to the signature issue to which I turn below, I conclude that the e mail referred to in Paragraph 3 above is capable of being a sufficient note or memorandum for the purpose of Section 4 because it is in writing, and it is not disputed by Mr Metha that the offer was accepted orally on behalf of JPF as described by Ms Albaster in Paragraph 7 of her witness statement.
It is true to say that the e mail contemplates the preparation of formal documentation in relation to the guarantee. No argument was advanced by Mr Mehta to the effect that this qualification precluded the e mail from being a note or memorandum for Section 4 purposes. I have considered it only because he appears in person. An agreement to do something which is expressed to be subject to the execution of formal documentation will usually be regarded as incomplete until the formal documentation has been settled and signed – see by way of example Winn v. Bull (1877) 7 Ch.D 29. However, I do not see that this rule would prevent an offer qualified in this manner from being a Section 4 note or memorandum if Devin J’s reasoning in Parker v. Clark (ante) is correct. If it is not, then the document would not be a Section 4 note or memorandum irrespective of the Winn principle.
The Signature Issue
The e mail referred to in Paragraph 3 above is not signed by anyone in a conventional sense. Mr Mehta’s name or initials do not appear at the end of the e mail or, indeed, anywhere else in the body of the e mail. Inevitably, therefore, JPF must contend that the presence of the e mail address at the top of the e mail constitutes a signature sufficient to satisfy the requirements of Section 4.
As is well known to anyone who uses e mail on a regular basis, what is relied upon is not inserted by the sender of the e mail in any active sense. It is inserted automatically. My knowledge of the technicalities of e mail is not sufficiently detailed to enable me to know whether it is inserted by the ISP with whom the sender or the recipient has his e mail account. However, I accept Mr Aslett’s submission that as a matter of obvious inference, if it is inserted by the latter it can only be from information supplied by the former. Mr Mehta suggested that the address was inserted by his employee. I do not see how this could be so and certainly Mr Mehta was not able to give me a coherent explanation of how that might be so. It is possible that Mr Mehta’s employee was authorised to use Mr Mehta’s e mail account remotely but, even if that is so, I do not see how that can impact on any of the issues I have to resolve since it is not in dispute that the e mail was sent on the instructions of Mr Mehta and the method by which the sender address came to be inserted would not be affected even if that was the position.
It is submitted on behalf of JPF that the appearance of the sender’s address at the top of the document constitutes a signature either by the sender or by “… some other person thereunto by him lawfully authorised …” because it is well known to all users of e mail that the recipient of the e mail will always be told the e mail address of the e mail account from which the e mail is sent in the form it appears on the e mail referred to in Paragraph 3 above. That being so, it is submitted that by authorising an agent to send an e mail using the sender’s e mail account, to a third party the sender knows that his her or its e mail address will appear on the recipient’s copy and that is sufficient for it to be held to be a signature for the purposes of Section 4.
It was submitted by Mr Aslett that intention was irrelevant – all that was required was a document that constituted a sufficient memorandum (which, as I have held, the e mail was) and the signature somewhere on the note or memorandum of either the person to be bound or his duly authorised agent. In support of this contention, Mr Aslett relied on the decision of the House of Lords in Elpis Maritime Company Limited v. Marti Chartering Company Limited [1991] 3 WLR 330. The facts of that case were very different to the facts of this case. There was no dispute in that case that the party to be charged had signed the document. The dispute in that case concerned whether or not the fact that the party to be bound signed the relevant document as agent made any difference given that there was a clause within the document that purported to create a guarantee by the party purporting to sign only as agent. It had been contended that if such was the case then the fact the agreement contained a clause under which the signing party personally agreed to guarantee certain obligations was not relevant. It was this last argument that was rejected by the House of Lords by reference to In re Hoyle [1893] 1 Ch 84 in which A.L.Smith LJ said: “The question is not what is the intention of the person signing the memorandum but is one of fact, vis is there a note or memorandum of the promise signed by the party to be charged?”. It is because this is so that in other cases the courts have accepted letters to third parties, instructions to telegraph companies signed by the sender, and affidavits in unconnected actions as being a sufficient memorandum providing they are signed by the parties to be bound. It was this that led the House of Lords to conclude that it was irrelevant in what capacity or with what intention the document there being considered was signed.
In my judgment, the issue that arises in this case is not the issue that the House of Lords considered in Elpis Maritime. Here the issue is not with what intention or with what capacity did Mr Mehta or his employee sign the relevant document – rather the issue is whether it has been signed at all.
What is relied upon is an e mail address. It is the e mail equivalent of a fax or telex number. It is well known that the recipient of a fax will usually receive a copy that has the name and/or number of the sender automatically printed at the top together with a transmission time. Can it sensibly be suggested that the automatically generated name and fax number of the sender of a fax on a faxed document that is otherwise a Section 4 note or memorandum would constitute a signature for these purposes? If Mr Aslett is right then the answer depends solely upon whether the sender (or the sender’s principal where the sender was an agent) knew that the number or address would appear on the recipient’s copy.
Mr Aslet, relies on Evans v. Hoare (ante) in support of this argument. The issue in that case was whether the Defendant was bound by the relevant document. The evidence in that case established that the relevant document had been drawn up by a duly authorised agent of the Defendants. The document was in the form of a letter from the Plaintiff and the words “Messrs Hoare, Marr & Co, 26,29 Budge Row, London EC” appeared after the Plaintiff’s address at the head of the letter. The question was whether these words constituted a signature of “… some person …thereunto lawfully authorised …” by the Defendants. It was argued on behalf of the Plaintiff in that case that the appearance of the Defendant’s name in the letter tendered to the Plaintiff for signature on behalf of the Defendant was sufficiently signed on behalf of the Defendant because the Defendant’s name had been “… written … with the defendant’s authority, with the intention of designating the party to be charged, and for the purpose of making a contract which should be binding on the Plaintiff” – see Pages 594-5 of the reported argument.
It was this argument that succeeded. Cave J, said:
“I am of opinion that the principle to be derived from the decisions is this. In the first place, there must be a memorandum of a contract, not merely a memorandum of a proposal; and secondly, there must be in the memorandum, somewhere or other, the name of the party to be charged, signed by him or by his authorized agent. Whether the name occurs in the body of the memorandum, or at the beginning, or at the end, if it is intended for a signature there is a memorandum of the agreement within the meaning of the statute.” [Emphasis supplied]
As was emphasised by Cave J, the appearance of the name of the party to be bound must be “intended for a signature”. It is noteworthy that that this case was cited to the House of Lords in Elpis Maritime but was not disapproved by Lord Brandon. I do not think it can be said (and, in any event, there is no evidence) that either Mr Mehta’s employee or the ISP either sending or receiving the e mail intended Mr Mehta’s e mail address to be a signature in the sense identified above.
There are dicta that support the approach of Cave J in Caton v. Caton (1867) LR 2 HL 127. In that case, the House was concerned with a document that started by referring to “the under mentioned parties” and then referred to the parties in question by name in relation to various promises. Neither party signed the document and the question was whether the document constituted a sufficient note or memorandum signed by the parties to be bound within Section 4. The House of Lords held that it was not. In arriving at this conclusion, Lord Chelmsford C said at 139-40:
“The cases on this point … establish that the mere circumstances of the name of a party being written by himself in the body of a memorandum of agreement will not of itself constitute a signature. It must be inserted in the writing in such a manner as to have the effect of “authenticating the instrument” or “so as to govern the whole instrument”… The name of the party, and its application to the whole of the instrument, can alone satisfy the requisites of a signature.
Lord Westbury said (Page 143) that what is alleged to constitute the signature must
” … be so placed as to show that it was intended to relate and refer to, and that in fact it does relate and refer to, every part of the instrument. … It must govern every part of the instrument. It must shew that every part of the instrument emanates from the individual so signing, and that the signature was intended to have that effect. It follows that if a signature be found in an instrument incidentally only, or having relation and reference only to a portion of the instrument, the signature cannot have legal effect and force which it must have in order to comply with the statute, and to give authenticity to the whole of the memorandum. [Emphasis supplied]
In the light of the dicta cited above, it seems to me that a party can sign a document for the purposes of Section 4 by using his full name or his last name prefixed by some or all of his initials or using his initials, and possibly by using a pseudonym or a combination of letters and numbers (as can happen for example with a Lloyds slip scratch), providing always that whatever was used was inserted into the document in order to give, and with the intention of giving, authenticity to it. Its inclusion must have been intended as a signature for these purposes. I agree with Mr Aslett’s analysis in Paragraph 4 of his supplementary written submissions that in Caton the names were included in the document under consideration to describe intended performance. I also accept his submission in Paragraph 6 of his supplementary written submissions that the meaning of “incidental” in this context means “… where the signature or name just happens to appear somewhere”.
I do not accept his submissions that Godwin v. Francis (1870) LR 5 CP 295 or McBlain v. Cross (1871) 25 LT 804 have relevance to the issue I have to decide. Godwin plainly involved a Section 9 note or memorandum in the form of instructions to a telegraph company signed by the party to be charged on whose behalf the telegram concerned was sent. Bovill CJ then proceeded to consider the position in the event that this was wrong and concluded that “… the mere telegram written out and signed in the way indicated by the telegram clerk, if done with the authority of the vendors, would have been a sufficient signature”. This is not this case – no name or signature or any sort appears in the body of the e mail. McBlaim takes the issue no further because the telegram in that case stated that it came from the sender and did so with his express authority. That is not this case.
I have no doubt that if a party creates and sends an electronically created document then he will be treated as having signed it to the same extent that he would in law be treated as having signed a hard copy of the same document. The fact that the document is created electronically as opposed to as a hard copy can make no difference. However, that is not the issue in this case. Here the issue is whether the automatic insertion of a person’s e mail address after the document has been transmitted by either the sending and/or receiving ISP constitutes a signature for the purposes of Section 4.
In my judgment the inclusion of an e mail address in such circumstances is a clear example of the inclusion of a name which is incidental in the sense identified by Lord Westbury in the absence of evidence of a contrary intention. Its appearance divorced from the main body of the text of the message emphasises this to be so. Absent evidence to the contrary, in my view it is not possible to hold that the automatic insertion of an e mail address is, to use Cave J’s language, “… intended for a signature…”. To conclude that the automatic insertion of an e mail address in the circumstances I have described constituted a signature for the purposes of Section 4 would I think undermine or potentially undermine what I understand to be the Act’s purpose, would be contrary to the underlying principle to be derived from the cases to which I have referred and would have widespread and wholly unintended legal and commercial effects. In those circumstances, I conclude that the e mail referred to in Paragraph 3 above did not bear a signature sufficient to satisfy the requirements of Section 4.
Before leaving this issue I ought to mention the Electronic Communications Act 2000. This Act empowers the appropriate Minister to issue statutory instruments in order to modify any other stature or statutory instrument in order to facilitate electronic communications. My understanding is that this Act was enacted in order to give effect to the EU Directive on E Commerce (2000/31/EC). No relevant statutory instrument made under this Act has been drawn to my attention. It is noteworthy that the Law Commission’s view in relation to this Directive is that no significant changes are necessary in relation to statutes that require signatures because whether those requirements have been satisfied can be tested in a functional way by asking whether the conduct of the would be signatory indicates an authenticating intention to a reasonable person. This approach is consistent with what I have said so far in this Judgment. Thus, as I have already said, if a party or a party’s agent sending an e mail types his or her or his or her principal’s name to the extent required or permitted by existing case law in the body of an e mail, then in my view that would be a sufficient signature for the purposes of Section 4. However that is not this case.
Conclusion
In those circumstances, whilst I conclude that the e mail referred to in Paragraph 3 above is in principle capable of being a Section 4 note or memorandum notwithstanding that it contains an offer and thus came into existence before not after the contract which it is said to memorialise, it does not bear the signature within the meaning of Section 4 of the Statute of Frauds of either Mr Mehta or his duly authorized agent. Accordingly, I allow the appeal and dismiss the application for summary judgment on the guarantee point.
There then remains the question of whether or not there should be judgment against Mr Mehta for £5,000 being the alternative claim made against him by JPF. The District Judge made no alternative findings about this claim because he concluded that the £5,000 fell within the sum that he concluded had been guaranteed by Mr Mehta. However, there was no Respondent’s Notice served or filed on behalf of JPF in relation to this issue. It was accepted by Mr Aslett that there would have to be such a Notice if this issue was to be disposed of on the hearing of this appeal and for that reason accepts that this issue will have to be dealt with either by fresh application to the District Judge or left to trial. In those circumstances I say no more about it.
Actionstrength Ltd (t/a Vital Resources) v. International Glass Engineering
[2003] UKHL 17
“5. The facts assumed to be true for purposes of these proceedings at this stage have been helpfully summarised by Lord Walker of Gestingthorpe, whose summary I gratefully adopt and need not repeat. If tested at trial those facts might or might not be established. But if, as must be assumed, they are correct, they illustrate the second mischief to which I have referred above. Actionstrength agreed with Inglen to supply labour to enable Inglen (the main contractor chosen by St-Gobain) to build a factory for St-Gobain. Inglen’s deficiencies as a contractor led to Actionstrength being drawn, more closely than would be normal for a labour-only sub-contractor, into the oversight of Inglen’s performance. From an early date Actionstrength had difficulty obtaining payment by Inglen and considerable arrears built up. Actionstrength was contractually entitled to terminate its contract with Inglen on 30 days’ notice if duly approved invoices had not been paid within 30 days and remained unpaid. Such termination would have been seriously prejudicial to St-Gobain, whose interest was to take expeditious possession of a completed factory. Actionstrength threatened to withdraw its labour. St-Gobain induced it not to do so by promising that, if Inglen did not pay Actionstrength any sums which were or became owing, it (St-Gobain) would do so. On that undertaking Actionstrength forebore to withdraw its labour and continued to supply labour to Inglen, whose indebtedness to Actionstrength increased fivefold over the weeks that followed. St-Gobain received the benefit of the work done by the labour which Actionstrength supplied. When Actionstrength, unable to obtain payment by Inglen, sought to enforce the agreement against St-Gobain, that company relied on the absence of a written memorandum or note of the agreement to defeat Actionstrength’s claim.
6. While section 4 of the Statute of Frauds has been repealed or replaced in its application to the other four classes of contract originally specified, it has been retained in relation to guarantees. In 1937 the Law Revision Committee (in its Sixth Interim Report, Statute of Frauds and the Doctrine of Consideration, Cmd 5449, paragraph 16) recommended the repeal of so much as remained of section 4. But a minority headed by Goddard J dissented in relation to guarantees, on the grounds
(1) that there was a real danger of inexperienced people being led into undertaking obligations which they did not fully understand, and that opportunities would be given to the unscrupulous to assert that credit was given on the faith of a guarantee which the alleged surety had had no intention of giving;
(2) that a guarantee was a special class of contract, being generally one-sided and disinterested as far as the surety was concerned, and the necessity of writing would give the proposed surety an opportunity for thought;
(3) that the requirement of writing would ensure that the terms of the guarantee were settled and recorded;
(4) that Parliament had imposed a requirement of writing in other contractual contexts;
(5) that judges and juries were not infallible on questions of fact, and in the vast majority of cases the surety was getting nothing out of the bargain;
(6) that it was desirable to protect the small man; and
(7) that the necessity for guarantees to be in writing was generally understood.
No action was taken on the 1937 report. In 1953 the Law Reform Committee (First Report, Statute of Frauds and Section 4 of the Sale of Goods Act 1893, Cmd 8809) endorsed the recommendation of its predecessor that section 4 of the Statute of Frauds should be largely repealed but, agreeing with those who had earlier dissented, unanimously recommended that the section should continue to apply to guarantees. Effect was given to this report by enactment of the 1954 Act. Whatever the strength of the reasons given by the dissenting minority for retaining the old rule in relation to conventional consumer guarantees, it will be apparent that those reasons have little bearing on cases where the facts are such as those to be assumed here. It was not a bargain struck between inexperienced people, liable to misunderstand what they were doing. St-Gobain, as surety, had a very clear incentive to keep the Actionstrength workforce on site and, on the assumed facts, had an opportunity to think again. There is assumed to be no issue about the terms of the guarantee. English contract law does not ordinarily require writing as a condition of enforceability. It is not obvious why judges are more fallible when ruling on guarantees than other forms of oral contract. These were not small men in need of paternalist protection. While the familiar form of bank guarantee is well understood, it must be at least doubtful whether those who made the assumed agreement in this case appreciated that it was in law a guarantee. The judge at first instance was doubtful whether it was or not. The Court of Appeal reached the view that it was, but regarded the point as interesting and not entirely easy: [2002] 1 WLR 566, 568, [2001] EWCA Civ 1477, paragraph 2. Two members of the court discussed the question at a little length, with detailed reference to authority.
7. It may be questionable whether, in relation to contracts of guarantee, the mischief at which section 4 was originally aimed, is not now outweighed, at least in some classes of case, by the mischief to which it can give rise in a case such as the present, however unusual such cases may be. But that is not a question for the House in its judicial capacity. Sitting judicially, the House must of course give effect to the law of the land of which (in England and Wales) section 4 is part. As Mr McGhee for Actionstrength correctly recognised, that section is fatal to his client’s claim unless St-Gobain can be shown to be estopped from relying on the section.
8. Neither party suggested, nor could it be suggested, that the ordinary rules of estoppel are inapplicable to guarantees. The well-known case of Amalgamated Investment & Property Co Ltd (In Liquidation) v Texas Commerce International Bank Ltd [1982] QB 84 is one in which a party was held to be estopped from disputing the assumed effect of a guarantee. But the same approach should be followed as in other cases. On the facts of this case that involves asking three questions: (1) What is the assumption which Actionstrength made? (2) Did St-Gobain induce or encourage the making of that assumption? (3) Is it in all the circumstances unconscionable for St-Gobain to place reliance on section 4? It would, as Mr Soole QC for St-Gobain submitted, be wrong in principle to ask the third question before both of the first two.
9. It is implicit in the assumed facts that Actionstrength believed itself to be the beneficiary of an effective guarantee. Its difficulty, in my view insuperable, arises with the second question. For in seeking to show inducement or encouragement Actionstrength can rely on nothing beyond the oral agreement of St-Gobain which, in the absence of writing, is rendered unenforceable by section 4. There was no respresentation by St-Gobain that it would honour the agreement despite the absence of writing, or that it was not a contract of guarantee, or that it would confirm the agreement in writing. Nor did St-Gobain make any payment direct to Actionstrength which could arguably be relied on as affirming the oral agreement or inducing Actionstrength to go on supplying labour. If St-Gobain were held to be estopped in this case it is hard to see why any oral guarantor, where credit was extended to a debtor on the strength of a guarantee, would not be similarly estopped. The result would be to render nugatory a provision which, despite its age, Parliament has deliberately chosen to retain.
10. For these reasons, and those given by Lord Hoffmann, Lord Clyde and Lord Walker of Gestingthorpe, with which I agree, I am of the reluctant but clear opinion that the appeal must be dismissed. I agree with the order which Lord Walker proposes.
The next question is whether the receipt of the 4th September and the Building Society application can be treated together as a memorandum or note. In my view, the reference to the deposit and no. 1 Kinvara Road and the close connection in time between the two documents enables me to read the documents together. The true principle on this matter was, I think, stated by Jenkins L.J. in Timminsv. Moreland Street Property Co. (1), when he said: “. . . I think it is still indispensably necessary, in order to justify the reading of documents together for this purpose [the provision of a memorandum or note in writing for the purposes of Statute of Frauds], that there should be a document signed by the party to be charged which, while not containing in itself all the necessary ingredients of the required memorandum, does contain some reference, express or implied, to some other document or transaction. Where any such reference can be spelt out of a document so signed, then parol evidence may be given to identify the other document referred to, or, as the case may be, to explain the other transaction, and to identify any document relating to it. If by this process a document is brought to light which contains in writing all the terms of the bargain so far as not contained in the document signed by the party to be charged, then the two documents can be read together so as to constitute a sufficient memorandum for the purposes of s. 40 of the Law of Property Act, 1925. The laying of documents side by side may no doubt lead to the conclusion as a matter of res ipsa loquitur that the two are connected; but before a document signed by the party to be charged can be laid alongside another document to see if between them they constitute a sufficient memorandum, there must, I conceive, be found in the document signed by the party to be charged some reference to some other document or transaction.”
If therefore the issue in the case be whether there was a sufficient memorandum or note in writing signed by the party to be charged of the agreement made on the 4th September, I am of opinion that the plaintiff would succeed. But the agreement made on the 4th September was varied by mutual consent on the 4th November when the plaintiff and the defendants agreed that the plaintiff would purchase the house by way of lease and that the purchase money would be reduced by £100 and there is no memorandum or note in writing of this variation. Counsel for the plaintiff, who has
McQuaid v. Lynam.
[1965] IR 564
Kenny J.
“The real problem I think is whether the defendants can successfully contend that the contract of the 4th September was varied by mutual agreement when there is a memorandum or note in writing of the contract of the 4th September but not of the variation. In any discussion of this problem it is essential to distinguish between the case in which the parties to an agreement intend that agreement to find expression in a written contract and that in which the parties make an oral contract which is intended to be binding. If in the latter case a memorandum or note in writing is required by the Statute of Frauds, that memorandum or note does not become the contract. This distinction appears in s. 2 of the Statute of Frauds which so far as material provided:”No action shall be brought . . . upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them . . . unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised.” The same distinction was emphasised in Thompson v. The King (1) and in Law and Another v.Robert Roberts and Co. (2). In the first type of case, that is, where the parties intend their agreement to find expression in a written document, a subsequent oral variation of the contract is not effective unless it is evidenced by a memorandum or note in writing (see Goss v. Nugent (3) and the speech of Lord Atkinson in British and Beningtons, Ltd. v. N. W. Cachar Tea Co. and Others (4)). But in the other type of case, where the oral agreement is intended to be the contract, evidence may be given of an agreed variation even if there is a memorandum or note of the contract but not of the variation. This view is supported by the decision of the Court of Appeal in England in Beckett v. Nurse (5). In that case the plaintiff claimed specific performance of an alleged agreement for the sale of land and relied on a receipt as the memorandum or note in writing. The Court of Appeal held that the receipt was not the contract and that as the plaintiff was relying on an oral agreement for sale, the defendant was entitled to show that the real bargain between the parties was different from that contained in the memorandum.
In this case the evidence establishes that the oral contract made on the 4th September was varied by mutual agreement on a subsequent date. The variation was that the defendants were to sell to the plaintiff not a freehold interest but a leasehold interest, but the amount of the rent to be paid and the date of the commencement of the lease were not agreed: as these were not agreed, there was never a valid contract to sell the property by lease or to grant a lease (see the judgment of the Supreme Court delivered by Mr. Justice James Murnaghan in Kerns v. Manning (1).
Counsel for the plaintiff has also contended that the payment of £500 on the 4th November was an act of part performance and that the Statute of Frauds is not therefore an answer to the plaintiff’s claim. As there was not a valid contract between the parties, the question of part performance does not arise.
I am therefore of opinion that the plaintiff’s action fails. As, however, the case may go further I wish to state that the plaintiff would, in my opinion, be entitled to damages of £3 3s. 0d. (the surveyor’s fee) only if he established that there was a contract. It seems to me that the defendants would be unable to make a good title to the property because of the undertaking which they had entered into with the Corporation. A vendor who is sued for damages for breach of contract and who cannot give a good title is not liable for any damages except the expenses which the purchaser has incurred (see Bain v. Fothergill (2); Kelly v. Duffy (3) and McDonnell v. McGuinness (4)).”
Mulhall v. Haren
[1981] IR 364
Keane J.
“There remains the defence under s. 2 of the Statute of Frauds, 1695, which provides:
“No action shall be brought whereby to charge any executor or administrator upon any special promise, to answer damages out of his own estate, or whereby to charge the defendant upon any special promise to answer for the debt, default, or miscarriage of another person, or to charge any person upon any agreement made upon consideration of marriage, or upon any contract of sale of lands, tenements, or hereditaments, or any interest in or concerning them, or upon any agreement that is not to be performed within the space of one year from the making thereof, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized.”
The section is in identical terms to s. 4 of the (English) Statute of Frauds, 1677. With regard to the Act of 1677, the italicised words were repealed in England and replaced by s. 40 of the Law of Property Act, 1925, which provides:
“No action may be brought upon any contract for the sale, or other disposition of land or any interest in land, unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto by him lawfully authorised.”
It has been held in England that s. 40, sub-s. 1, of the Act of 1925 is to be construed in the same manner as was applied to s. 4 of the Statute of 1677 prior to 1926: see Tiverton Ltd. v. Wearwell Ltd. 3
It was submitted on behalf of the plaintiffs that the letters to which reference has already been made, the receipt and the draft contract together constituted a memorandum or note sufficient to satisfy the Statute of 1695. It was submitted on behalf of the defendants that the use of the expression”subject to contract” in the letters which initiated the correspondence prevented that correspondence, and the documents incorporated therewith, from constituting a sufficient memorandum or note. As I understand this submission, it is based on the proposition that the memorandum or note to which the section refers must be a memorandum or note of the agreement sued upon and, accordingly, it must recognise, either expressly or by implication, the existence of that contract. Since the use of the words”subject to contract” is inconsistent with the existence of a concluded agreement (the argument runs), the use of that expression in the memorandum or note relied upon prevents it from being a sufficient memorandum or note for the purpose of the statute.
Had this question arisen prior to the decision of the English Court of Appeal in Law v. Jones 4 , it would have been possible to resolve it with comparative ease. Indeed, I venture to think that, prior to that decision, very few members of either branch of the legal profession in England or Ireland would have thought that a writing which expressly stated that a sale of property was “subject to contract” could constitute a memorandum or note sufficient to satisfy the Statute of Frauds. I believe that the same view would have been taken of a letter from a solicitor which formed part of a chain of correspondence commencing with a letter containing the “subject to contract” stipulation. A series of authorities in both jurisdictions (commencing with Winn v. Bull 5 ) had established beyond serious doubt the principle that an oral agreement for the sale of land which was stated to be subject to contract was not enforceable. As a result, it had become a common practice for solicitors, who were acting for parties who had entered into such oral agreements, to commence the correspondence with a letter stating that the sale was “subject to contract.” Their reasons for doing so were twofold. In the first place, they were conscious of the danger of committing their clients to an open contract for the sale of land by writing a letter which provided the necessary writing to satisfy the statute, a danger which was of particular significance having regard to the complexity of the law of real property. In the second place, they were alive to the possibility that disputes might arise as to the actual terms of the concluded bargain which could only result in expensive litigation.
But while this practice was common, it was by no means universal. Occasions arose, perhaps particularly in the sale of registered land, when the title was so abundantly clear as greatly to reduce the dangers to either party of an open title. There were also occasions on which solicitors, mindful of the fact that their clients had secured good bargains, avoided the use of the phrase “subject to contract.” In such cases, however, the solicitors frequently used language which indicated that the parties contemplated the execution of a formal agreement. Thus, a solicitor initiating the correspondence, while not stating that the sale was “subject to contract,”might use some expression such as “please let us have draft contract for approval.” In cases where a dispute arose as to whether, in such circumstances, an enforceable contract existed, the court had to undertake an enquiry as to what was the intention of the parties and, in particular, what was the significance of the fact that they contemplated the execution of a formal agreement. These cases must be carefully distinguished from the cases in which the documents stated that the sale was “subject to contract.”They are fully reviewed in the judgment of Mr. Justice Kenny in Law v.Robert Roberts & Co. 1 , which was unanimously upheld by the Supreme Court on appeal. They are also reviewed in detail in the judgment delivered by Mr. Justice Costello on the 28th July, 1977, in Arnold v. Veale 6 (No. 3242P) where the judge was at pains to draw the distinction between the two lines of authority.
One of the earliest statements of the principle that the use of the phrase”subject to contract” normally indicates that neither party to an arrangement intends to be bound by the terms of the arrangement until they are embodied in a form of contract is to be found in Winn v. Bull. 5 In that case, the defendant agreed with the plaintiff to take a lease of a house for a certain term at a certain rent “subject to the preparation and approval of a formal contract.” No other contract was ever entered into between the parties. At p. 30 of the report Jessel M.R. said:”Now with regard to the construction of letters which are relied upon as constituting a contract, I have always thought that the authorities are too favourable to specific performance. When a man agrees to buy an estate, there are a great many more stipulations wanted than a mere agreement to buy the estate and the amount of purchase-money that is to be paid. What is called an open contract was formerly a most perilous thing, and even now, notwithstanding the provisions of a recent Act of Parliamentthe Vendor and Purchaser Act, 1874no prudent man who has an estate to sell would sign a contract of that kind, but would stipulate that certain conditions should be inserted for his protection. When, therefore, you see a stipulation as to a formal agreement put into a contract, you may say it was not put in for nothing, but to protect the vendor against that very thing. Indeed, notwithstanding protective conditions, the vendor has not unfrequently to allow a deduction from the purchase-money to induce the purchaser not to press requisitions which the law allows him to make. All this shews that contracts for purchase of lands should contain something more than can be found in the short and meagre form of an ordinary letter.”
At p. 32 Jessel M.R. said:”It comes, therefore, to this, that where you have a proposal or agreement made in writing expressed to be subject to a formal contract being prepared, it means what is says; it is subject to and is dependent upon a formal contract being prepared. When it is not expressly stated to be subject to a formal contract it becomes a question of construction, whether the parties intended that the terms agreed on should merely be put into form, or whether they should be subject to a new agreement the terms of which are not expressed in detail. The result is, that I must hold that there is no binding contract in this case, and there must therefore be judgment for the Defendant.”
The latter passage was cited by Molony C.J. in the leading Irish case: Thompson v. The King. 7 In that case, the words used were “subject contract”and it was held that the agreement came within what might be called the”subject to contract” line of authorities as distinct from the line of authorities applied in Law v. Robert Roberts & Co. 1 Accordingly, the agreement was held to be unenforceable. Gibson J. put the matter thus at p. 390 of the report:”2. Did this expression ‘subject contract’ defer contractual obligation till a formal contract was settled, accepted, and executed; or does it mean that the purchase terms having been fully and finally settled, a further contract was only contemplated for the purpose of putting the bargain into legal shape, without substantial additions or alterations? I adopt the former construction.”
In Lowis v. Wilson 8 an attempt was made to distinguish Winn v. Bull 5 on the ground that the agreement signed by Lowis, the plaintiff purchaser, stated that it was “subject to the preparation of a formal contract to be prepared by W. O. Armstrong, Solicitor for the vendor . . .” Dixon J. rejected the submissions that this rendered the case distinguishable from Winn v. Bull. 5 Recently, in In re Hibernian Transport Cos. Ltd. 9 Mr. Justice Walsh said at p. 202 of the report:”. . . in the ordinary course of events an agreement for the sale or purchase of land subject to contract means nothing more than an agreement to enter into a contract for the sale of land and, as such, it is not enforceable as if it were a contract.” It is right to say that this observation of the learned judge was probably obiter, but it is nonetheless noteworthy that no other member of the full Supreme Court who agreed with his judgment on the principal issue expressed any dissent from his view on this matter.
The same principle was applied in England in a number of cases subsequent to Winn v. Bull 5 : see Sante Land Co. Ltd. v. Forestal Land Co. Ltd. 10 ; Coope v. Rideout 11 ; Chillingworth v. Esche 12 ; Locket v. Norman-Wright 13 ; Keppel v. Wheeler 14 ; Raingold v. Bromley 15 ; George Trollope & Sons v. Martyn Bros. 16that case was disapproved of by the House of Lords in Luxor (East-bourne) Ltd v. Cooper 17 , but not on this “subject to contract” pointSpottis-woode, Ballantyne & Co. v. Doreen Appliances Ltd. 18 (per Lord Greene M.R. at p. 35) and D’Silva v. Lister House Ltd. 19 It was also the view of a particularly strong Court of Appeal (consisting of Lord Greene M.R., Cohen and Asquith L.JJ.) in Eccles v. Bryant & Pollock. 20 In this latter case, indeed, it was made clear that, in England at all events, where parties enter into an agreement for the sale of real property “subject to contract,” the contract is not complete until the parties have exchanged their copies in accordance with ordinary conveyancing practice in that country. Accordingly, in that case, even though the vendor’s solicitors had signed the contract, it was held that the fact that no exchange of contracts had taken place was sufficient to prevent an enforceable contract from coming into being. In this country, however, the practice of exchanging contracts is not so universally followed as in England, at all events outside Dublin, as is borne out by the evidence of Mr. McCarroll, the very experienced solicitor for the plaintiffs. Subject to this qualification, however, the law in both jurisdictions on this topic was the same and, until recent years, was settled, in my view, by this massive body of authority beyond any serious doubt.
But while the law on this topic had the advantages of reasonable certainty, it was also capable of producing results which appeared harsh and unjust. The extraordinary volatile market in land which developed in England and Ireland during the 1970’s also led to a practice as unattractive as its name which is “gazumping.” A vendor of land who had shaken hands on a deal frequently found himself with a substantially more attractive offer for the property within days, or even hours. There were many vendors who, whatever the temptations, refused to resile from bargains freely entered into, whether they were legally enforceable or not. But there were also some who either accepted the higher offer or went back to their original purchaser and attempted to squeeze more money out of him. Where no shadow of a memorandum in writing existed, even the most resourceful of lawyers or courts were powerless to redress such inequities unless, indeed, the doctrine of part performance could be successfully invoked. But where anything which could conceivably be regarded as a memorandum existed, considerable ingenuity was naturally expended upon bringing about the downfall of the “gazumper.” It was perhaps to be expected that, in this context, some attempt would be made to dislodge the well-entrenched”subject to contract” rule.
The first bridgehead was effected in Griffiths v. Young. 21 The plaintiff in that case wished to buy a plot of land from the defendant, who was not anxious to complete the contract of sale immediately. In April, 1963, the defendant asked the plaintiff to guarantee his bank overdraft and the plaintiff said that he was prepared to consider doing so if the defendant would agree to sell the land in question. The parties discussed all the terms of the contract of sale and subsequently visited their solicitors. On the 2nd May the plaintiff’s solicitor wrote to the defendant’s solicitor setting out all the terms of the agreement for the sale of the land, but the price was expressed to be “subject to contract.” On the 3rd May the defendant began pressing the plaintiff to provide the bank guarantee. The plaintiff got in touch with his solicitor, who telephoned the defendant’s solicitor and informed him that if the defendant was to have the plaintiff’s guarantee at once there must be a binding contract of sale at once, and that the reference to the arrangements being treated as”subject to contract” must be regarded as having been amended. Later on the same day, the defendant’s solicitor replied to the letter of the 2nd May as follows:”With reference to your letter of the 2nd instant, we confirm that we have received instructions from Mr. Young (the defendant) to sell the property mentioned in your letter . . . for £3,500 with completion at Michaelmas 12 month . . .” He signed the letter as agent for the defendant. On the 7th May the plaintiff gave the guarantee. In an action for specific performance of the agreement, the trial judge held that the letter of 2nd May amounted to an unconditional offer and the letter of 3rd May was an acceptance of this offer, and he granted a decree of specific performance. The defendant appealed on the ground that there was no sufficient memorandum or note of the agreement to satisfy s. 40, sub-s. 1, of the Act of 1925.
It was argued on behalf of the defendant that, while the two letters taken together constituted a memorandum, they could not constitute a memorandum of the agreement mentioned in s. 40, since the first letter contained on its face an assertion (in the words “subject to contract”) that no agreement had been concluded. It was argued on behalf of the plaintiff that the phrase “subject to contract” was not a term of the contract but merely referred to a “suspensive condition” which had been subsequently waived and could, accordingly, be ignored for the purpose of determining whether there was a sufficient memorandum or note of the agreement actually concluded. Widgery L.J., as he then was, thought the point a difficult one; but he appears to have accepted the general principle that a memorandum which, on its face, asserted that agreement had not been reached, could not be a memorandum for the purpose of section 40. He accepted the submission made on behalf of the plaintiff that this principle had no application where the only defect in the memorandum was a reference to a “suspensive provision” which had subsequently been waived. The other members of the Court (Russell and Cross L.JJ.) came to the same conclusion, but neither of them appear to have experienced the same difficulty which troubled Widgery L.J. They were both satisfied that the subsequent oral waiver of the”suspensive condition” cured any defect in the memorandum.
The far-reaching implications of the decision in Griffiths v. Young 21 soon became apparent when Law v. Jones 4 came before the same court this time composed of Russell, Buckley and Orr L.JJ. In that case there was an oral agreement on the 17th February, 1972, for the sale by the defendant to the plaintiff of a certain property for £6,500. On the 18th February, the defendant’s solicitors wrote to the plaintiff’s solicitors referring to the plaintiff’s “proposed purchase of the above property for £6,500 subject to contract” and stating that they would obtain the title deeds and submit a draft contract as soon as possible. On 25th February, they wrote again referring to the earlier letter and enclosing the draft contract which contained all the essential terms of the agreement. On the 7th March the plaintiff’s solicitors acknowledged receipt of both letters and the draft contract. The defendant then sought a further £1,000 and on the 13th March the parties agreed orally to increase the price to £7,000. The trial judge accepted the plaintiff’s evidence that on that occasion the defendant said to the plaintiff:”I shall not go back on my word. My word is my bond. It is yours now: carry on and make all your arrangements.” The defendant’s solicitors wrote on the 17th March confirming that an increase in the purchase price to £7,000 had been agreed. A completion date of the 21st April, 1972, was agreed. But on the 13th April the defendant wrote to the plaintiff informing him that, because of the upsurge in house prices, he had decided to put the property up for auction. It was as blatant and indefensible a piece of “gazumping” as could be imagined.
On this occasion, Russell L.J., found himself in the minority. He said at p. 119 of the report that the language of the writings prior to the letter dated the 17th March could not constitute a sufficient memorandum of the oral contract of the 17th February at the price of £6,500 because of the language of the first letter in the chain dated the 18th February, i.e., the reference to a “proposed purchase . . . subject to contract.” The letter of 17th March was, accordingly, no more than a written record of an agreed variation of a term in a contract which was still in the course of negotiation. He thought it unnecessary to decide whether the written memorandum had to point positively to an existing contract; it was clear, in his view, that at the very least, the language used must not negative the existence of a contract. He distinguished Griffiths v. Young 21 on the basis that in that case “subject to contract” was merely a suspensive condition which had been later orally agreed to be waived and was, therefore, to be treated as not incorporated in the letter of the 3rd May.
Buckley L.J. considered that little turned on the use of the expression
Shirley Engineering Ltd. v. Irish Telecommunications Investments plc
[1999] IEHC 204 (2nd December, 1999)
Geoghegan J
13. Strictly speaking, it is unnecessary for me to deal with the Statute of Frauds issue. Given that I have held that there was no concluded agreement, that issue does not really arise. But in case a higher court disagreed with my views, I think it would be useful if I did in fact deal with the Statute of Frauds point. For this purpose I must artificially assume that there was a concluded agreement and the question then arises is there a note or memorandum to satisfy the statute. On one view the letter from Mr. McGrath of 3rd March, 1997 which I have already set out is almost a textbook note or memorandum. I think that I am right in saying that specific performance decrees have been granted many times in the past on foot of alleged memoranda much less clear than that one, though in the light of Boyle -v- Lee that might no longer be the case. I am unsure of this however because it is not entirely clear to me that in his comments on the adequacy of the note or memorandum in Boyle -v- Lee , Finlay C.J. addressed the question of whether every term or only the essential terms in an orally concluded agreement had to be included in the note or memorandum. What the former Chief Justice seems to have been addressing were two different points. One is whether the note or memorandum must either expressly or by implication acknowledge the existence of a concluded agreement and he, like the other members of the Court held that it must, thereby agreeing with the views already expressed by Keane J. in Mulhall -v- Haren, [1981] I.R. 364. His reference to “the price, deposit, closing date, résumé of title etc.” is in that particular context and not in any other context. He is suggesting that if those matters were clearly set out in a document that would be an implied acknowledgement of an agreement. Secondly, he was again agreeing with the views of Keane J. in Mulhall -v- Haren that any words in the memorandum which indicated a denial of a contract prevented the memorandum itself from being sufficient for the purposes of the statute. I have already held that there was no implied term in the relevant negotiations in this case that a so-called usual deposit would be paid and I have also held that the deposit was an important term. But that was entirely in the context of whether there was a concluded agreement or not. Once the deposit had still to be agreed there was no concluded agreement. It does not follow from that that the amount of a deposit expressly or by implication agreed would upon have to be set out in the note or memorandum to satisfy the Statute of Frauds. The authorities seem to establish that only the essential terms need be included in the note or memorandum and by that I mean the kind of terms that would always be regarded as essential, together with any special added terms which the parties in the particular case regarded as essential. I do not think that the amount of the deposit is an essential term in that sense, that is to say in the sense that it would have to be included in the note or memorandum. Mr. John Farrell, S.C., in his book “Irish Law of Specific Performance” says the following:-
“Questions may arise whether every term agreed by the parties must be in that memorandum. The case law makes it clear that some terms are always ‘essential’ or ‘material’ in contracts for the sale of land. These are the parties, the property and the consideration so these must be ascertainable from the memorandum relied on.”
14. He goes on to cite a passage from Lord McDermott, L.C.J., in Stinson -v- Owens , unreported judgment but noted in 107 I.L.T.S.J. 239:-
“…. that a memorandum may satisfy the requirements of the statute without mentioning every term that has been agreed between the parties, but that to be good it must mention all the terms which are essential or material. And I am further of the opinion that for the purposes of this requirement what is material or essential must be considered, at any rate primarily, from the point of view of the parties themselves.”
15. Similar views were expressed by the Supreme Court in the form of the leading judgment by Maguire C.J. in Godley -v- Power, (1961) 95 I.L.T.R. 135 at 145, the relevant passage is as follows:-
“A memorandum must contain all essential terms. The parties, the property, and the consideration must always be ascertainable from it, but it need not contain any terms which the general law would imply.”
16. If, therefore, there had been a concluded agreement in this case which had embraced the amount of the deposit, I think that the letter from Mr. McGrath dated 3rd March, 1997 would have been a good note or memorandum of it to satisfy the Statute of Frauds and I reject the argument that it was part of on-going correspondence in which it had been made clear that everything was subject to contract. This was the first letter coming from the Solicitor’s office. As it does not arise, I express no views as to whether perhaps the Plaintiff might have been estopped from relying on the letter of 3rd March as a note or memorandum in view of the fact that his own Solicitors, William Fry, vehemently denied the existence of any contract in the subsequent correspondence from them.
17. The reason that this sale fell through was because a much higher offer came in from another potential purchaser. In the event, the alternative transaction was never completed either. The Plaintiff was understandably aggrieved as it appeared to be a straight case of gazumping on the part of the Defendant. However, I do not intend to go into the circumstances of that aspect of the case in this judgment, though they may possibly have some relevance if and when I come to consider any question of costs. With great sympathy for the Plaintiff and great regret, I must dismiss the action.
Mackey v Wilde
[1998] 1 ILRM 449
Barron J
“Turning to the question of part performance, it is submitted that the plaintiff permitted the defendant to make greater use of the two beats the use of which was restricted by the 1920 deed. If the defendants’ records were correct, and the evidence suggested that they may not have been, then he did issue 50% more day tickets in 1986 than in 1985, but as against that the number of season tickets was reduced to 25% of those issued in the previous year.
The nature of the doctrine is comprehensively stated in the judgment of Lord Simon of Glaisdale in Steadman v. Steadman [1976] AC 536 at p. 558 as follows:
… almost from the moment of passing of the Statute of Frauds , it was appreciated that it was being used for a variant of unconscionable dealing, which the statute itself was designed to remedy. A party to an oral contract for the disposition of an interest in land could, despite performance of the reciprocal terms by the other party, by virtue of the statute disclaim liability for his own performance on the ground that the contract had not been in writing. Common law was helpless. But Equity, with its purpose of vindicating good faith and with its remedies of injunction and specific performance, could deal with the situation. The Statute of Frauds did not make such contracts void but merely unenforceable; and, if the statute was to be relied on as a defence, it had to be specifically pleaded. Where, therefore, a party to a contract unenforceable under the Statute of Frauds stood by while the other party acted to his detriment in performance of his own contractual obligations, the first party would be precluded by the Court of Chancery from claiming exoneration, on the ground that the contract was unenforceable, from performance of his reciprocal obligations; and the court would, if required, decree specific performance of the contract. Equity would not, as it was put, allow the Statute of Frauds ‘to be used as an engine of fraud’ . This became known as the doctrine of part performance — the ‘part’ performance being that of the party who had, to the knowledge of the other party, acted to his detriment in carrying out irremediably his own obligations (or some significant part of them) under the otherwise unenforceable contract.
The basis of this principle was that the contract by reason of its part performance passed from being a purely executory contract and might create equities which would justify the court enforcing it specifically, something it would not have done while it remained purely executory because of the absence of writing to satisfy the statute.
It is not surprising therefore that the older authorities require evidence of part performance before considering the terms of the agreement. In Maddison v. Alderson (1883) 8 App Cas 467 Lord O’Hagan said at p. 483:
The alleged agreement regarded an interest in lands and the statute nullified it for the purpose of the action. Per se , it was of no account and could have no value given to it unless, in the first instance, it was evidenced by acts to be accounted for only on the supposition of its existence. The allegation of it could not be made the subject of judicial consideration as founding any right of suit, in the absence of such acts, satisfactorily ascertained.
Later on p. 484 he said:
The previous question as to the sufficiency of the part performance must be settled before the construction and operation of the unwritten contract can be legiti mately approached. ‘The principle of the cases is’ , says Sir William Grant, ‘that the act must be of such a nature that, if stated, it would of itself infer the existence of some agreement; and then parol evidence is admitted to show what the agreement is.’ Then, but not till then.
As regards the nature of the acts which could be relied upon as part performance, the Earl of Selbourne LC, with whom Lord O’Hagan and Lord Fitzgerald concurred, said at p. 479:
All the authorities show that the acts relied upon as part performance must be unequivocally, and in their own nature, referable to some such agreement as that alleged….
At p. 485 Lord O’Hagan said:
But there is no conflict of judicial opinion, and in my mind no ground for reasonable controversy as to the essential character of the act which shall amount to a part performance, in one particular. It must be unequivocal. It must have relation to the one agreement relied upon, and to no other. It must be such, in Lord Hardwicke’s words, ‘as could be done with no other view or design than to perform that agreement’ . It must be sufficient of itself, and without any other information or evidence, to satisfy a court, from the circumstances it has created and the relations it has formed, that they are only consistent with the assumption of the existence of a contract the terms of which equity requires, if possible, to be ascertained and enforced.
While these passages appear to indicate that the terms of the contract could be investigated by the court, it seems that it was generally taken that the acts of part performance had to relate unequivocally to the actual contract. This was disapproved by Andrews LJ in Lowry v. Reid [1927] NI 142 who after analysing various passages from the judgments in Maddison v. Alderson and having indicated that he was not prepared to follow such strict rules said (at p. 159):
I make no apology for citing, in conclusion, as a correct summary of the law a passage from Fry on Specific Performance , 5th ed., p. 292, where the editor states that the true principle of the operation of acts of part performance seems only to require that the acts in question be such as must be referred to some contract, and may be referred to the alleged one; that they prove the existence of some contract, and are consistent with the contract alleged.
The learned judge then pointed out that the paragraph from Fry on Specific Performance of which he approved was in the same form as that in the edition published in 1881 which was before the decision in Maddison v. Alderson and that that decision necessitated no alteration in the text.
It is still necessary to show that the other party was aware of what was being done whether by standing by and not doing anything or by more active participation. An example of the latter is to be seen in Lowry v. Reid where Moore LCJ at p. 152 referred to the facts of that case as follows:
In my judgment there is relief for him, because on the facts of the case, having given up his own property to his own detriment, on the faith of his mother’s representations, this is a contract for the specific performance of which he is entitled in equity to a decree to carry those representations into execution, and if he is entitled to such a decree, he is equally entitled to rely on the doctrine of part performance to take the case out of the statute….
It must not be forgotten that ultimately the court is seeking to ensure that a defendant is not, in relying upon the statute, breaking faith with the plaintiff, not solely by refusing to perform the oral contract, but in the manner contemplated from the passage from the judgment of Lord Simon of Glaisdale to which I have referred.
The doctrine is based upon principles of equity. There are three things to be considered:
(1) The acts on the part of the plaintiff said to have been in part performance or of concluded agreement;
(2) the involvement of the defendant with respect to such acts;
(3) the oral agreement itself.
It is obvious that these considerations only relate to a contract of a type which the courts will decree ought to be specifically performed. Each of the three elements is essential. In my view, it does not matter in which order they are considered. Ultimately what is essential is that:
(1) there was a concluded oral contract;
(2) that the plaintiff acted in such a way that showed an intention to perform that contract;
(3) that the defendant induced such acts or stood by while they were being performed; and
(4) it would be unconscionable and a breach of good faith to allow the defendant to rely upon the terms of the Statute of Frauds to prevent performance of the contract.
If the terms of the contract cannot be considered until the acts of the plaintiff have been found capable of being acts of part performance, there is the possibility, admittedly not a very strong one, that the acts might well have been inconsistent with the terms of the contract and in fact not carried out in pursuance of it, but for a different reason. I do not suggest that in such circumstances the court would still accept that there had been part performance. But it does show that it is more logical to find out what the parties agreed since, in the absence of a concluded agreement, there is no point in seeking to find acts of part performance. The court can only then begin its determination as to whether the behaviour of the parties justifies the application of the equitable doctrine to modify the legal rule.
In the result it seems to me that while the passage from Fry on Specific Performance cited by Andrews LJ in Lowry v. Reid expresses the law, the different approach requires the statement of principle to be altered. It would then read: What is required is that the acts relied upon as being acts of part performance be such that on examination of the contract which has been found to have been concluded and to which they are alleged to refer show an intention to perform that contract.
In all the earlier cases, it was assumed that the acts of part performance must necessarily relate to and affect land: see the judgment of Lord Fitzgerald in Maddison v. Alderson at p. 491. Nothing which I have said should be taken to suggest a modification of that position.
There is no evidence in the instant case that the plaintiff issued any more or any less licences than he had the previous year nor that the defendant was aware of how many he was issuing. The plaintiff had never complained during the season that too many tickets were being issued by the defendant and in that regard there was nothing different in his behaviour as between 1985 and 1986. The detriment to the plaintiff which is alleged is presumably the lessening in value of the fishery by over-fishing. But the detriment to the plaintiff must be the result of what the plaintiff does with the defendant standing by and not detriment to the plaintiff as a result of what the defendant does with the plaintiff standing by. There was nothing in what was alleged which would in any way be a breaking of faith by the defendant with the plaintiff for the defendant to plead the statute. Even if there had been a concluded oral agreement as claimed, there were no acts on the part of the plaintiff which show an intention to perform that contract.
I would allow the appeal and refuse the relief sought.”
D&L Properties Ltd -v- Yolanda Ltd
[2017] IECA 11 Edwards J
Analysis and Decision
77. It is clearly the law that, on the hearing of an application to strike out proceedings under the inherent jurisdiction of the court as being bound to fail, the plaintiff does not have to demonstrate a prima facie case, much less establish as a matter of probability that he will succeed. Rather it is for the defendant to satisfy the court that the plaintiff “is bound to fail”. The respondent is correct in saying that this is a legal burden that the defendant must discharge.
78. It is possible to conceive in the abstract of many ways in which a defendant might seek to discharge that onus. However, in the context of the present case Yolanda has elected to seek to do that : (i) by disputing in evidence that it had any contract with D & L, thereby requiring that party to prove the existence of the contract on which it relies; (ii) by contending that the alleged contract was in any case one that engages s. 2 of the Statute of Frauds such that D & L must be in a position to demonstrate the existence of a sufficient note or memorandum of it in order to sue upon it for its enforcement, and (iii) by contending that no sufficient note or memorandum in fact exists.
79. The first substantive question therefore to be addressed in this judgment is whether Yolanda’s contention that the alleged contract was one that engages s. 2 of the Statute of Frauds is correct. Yolanda has suggested that s. 2 was necessarily engaged in one or other of two ways. It is suggested in the first instance it was engaged because the contract was properly to be regarded as one for the sale of lands or an interest in lands. In the alternative to that, it is suggested that it was engaged because the contract was one that was not to be performed within the space of one year.
80. I am satisfied on the evidence that the essential nature of the arrangement on foot of which the sum of €2.2 million was advanced to Yolanda, regardless of whether it involved an agreement between D & L and Yolanda as the respondent contends, or between Derek O’Leary and Yolanda as the appellant contends, was that it was a loan agreement. Notwithstanding that it was a loan intended to facilitate the progression of a stalled property development project, involving the construction of apartments, being undertaken by Yolanda, and that there was also a collateral agreement on foot of which the lender was to acquire an equity stake in Yolanda’s parent company, Elgin, it does not seem to me that the mere existence of those circumstances is sufficient to justify the agreement being characterised “as a contract for sale of lands, tenements or hereditaments, or any interest in or concerning them”. The agreement did not directly envisage or provide for the passing of any estate or interest in the lands the subject matter of the development project to the lender. No estate was in fact passed and there was no mortgage, legal or equitable, created in the course of the transaction. Rather the transaction in its essentials involved little more than a loan agreement whereby monies were advanced in consideration of a commitment to repay them with interest following sales of the apartments under development and the repayment of certain other borrowings.
81. On the basis that the transaction did not involve “a contract for sale of lands, tenements or hereditaments, or any interest in or concerning them” I am satisfied that s. 2 of the Statute of Frauds could never have been engaged on that basis.
82. However, the second basis on which it is claimed that s. 2 of the Statute of Frauds could potentially have been engaged is that the alleged contract represents an “agreement that is not to be performed within the space of one year from the making thereof”. It is common case that the monies were advanced, by whomever they were advanced, on the basis that the borrower would pay interest to the lender “of 20% per annum on sums drawn down for a period of 12 months and, thereafter, would pay a rate of 2% monthly on sums drawn down and remaining outstanding.” It was therefore clearly envisaged that the contract was not to be performed within one year. Accordingly, I am satisfied that Yolanda has demonstrated that s. 2 of the Statute of Frauds was engaged in principle on that basis.
83. The effect of Yolanda having demonstrated that the requirements of s. 2 are engaged in principle, is that it placed an evidential burden on D & L to point to whatever document or documents they contend constitutes a sufficient note or memorandum for the purposes of the Statute, alternatively to advance a legal basis, supported by cogent evidence, for contending that s. 2 should be disapplied. However, in either event the legal or persuasive burden of demonstrating that D & L’s action is bound to fail remains on Yolanda.
84. That burden would have been readily discharged if D & L had put nothing forward under either heading.
85. However, if either a purported note or memorandum, alternatively a basis for disapplying the Statute, was in fact advanced, it would become incumbent on Yolanda at that point to demonstrate to the court that what had been put forward was manifestly insufficient if it hoped to succeed. Any such assessment by the court would, of necessity, require a rigorous appraisal of the documentary evidence being relied upon. However, I consider that a plenary hearing would not be required to reach a determination on such issue, as the contents of the documents to be scrutinised would speak for themselves and be readily amenable to assessment by application of established jurisprudence as to whether or not they comprise an adequate note or memorandum of the alleged agreement.
86. It is stated at paragraph 21 of the written submissions filed on behalf of D & L that “[f]or the avoidance of doubt, the respondent does not accept that no written memorandum of the agreement sufficient to comply with the Statute of Frauds exists.” However, be that as it may, D & L has not in fact pointed to any particular document or suite of documents as purportedly constituting a sufficient note or memorandum beyond the reference, quoted by the High Court judge, to it being “patently evident from emails both before and after the money was paid” that the requirement was met. While certain e-mails and other documents have been exhibited to affidavits filed on behalf of D & L, and indeed on behalf of Yolanda, the respondent has not engaged with these to suggest on any cogent basis how they could constitute a sufficient note or memorandum.
87. The High Court judge characterised any evidence suggestive of a note or memorandum as being of the most tenuous nature. While there is nothing in the judgment to suggest a close examination of what was being put forward, this remark does on the face of it indicate an acceptance on his part that there was arguably some evidence, albeit tenuous, suggestive of a note or memorandum. He concluded that that was enough. Was he correct in so concluding?
88. It seems me that he was not. As stated earlier, once some evidence was being put forward of a purported note or memorandum it then fell to Yolanda to demonstrate to the court that what was being advanced was manifestly insufficient, and any assessment by the court of the sufficiency or otherwise of what was being put forward would, of necessity, have required a rigorous scrutiny of the evidence relied upon. While the judgment is silent as to the exact arguments that may have been put forward by the protagonists before the High Court concerning the sufficiency or otherwise of the e-mail correspondence relied upon, there is no evidence of any detailed analysis having been engaged in by the High Court judge concerning whether the documents relied upon adequately state all essential terms of the alleged agreement, whether they exhibit sufficient evidence of execution and authenticity in terms of being signed by the party against whom execution is sought or its agent, whether they were executed ante, contemporaneously with, or post the alleged contract, and so on. Yolanda advanced criticisms under all of these headings in the course of this appeal, and it was not suggested by D & L that these were novel arguments that had not been made before the High Court. It seems to me therefore that before the High Court judge would have been justified in concluding that such evidence as existed was “enough” he would have been obliged to engage in a rigorous and detailed scrutiny of that evidence. The kind of analysis called for does not appear to have been engaged in.
89. In so far as D & L sought to argue before the High Court, in the alternative, that s. 2 of the Statute of Frauds could be disapplied, it appears from the judgment of the High Court judge that this was based on the doctrine of part performance. Before addressing the remarks of the High Court judge with respect to that alternative argument, it is appropriate to observe that while a further alternative argument was advanced before us (the Court of Appeal) relating to alleged acquiescence / equitable estoppel there is no express reference in the judgment of the High Court judge to any such argument having been made before him That having been said, Mackey v Wilde (No 2), was, it is understood, opened to the High Court which, while enuciating a principle framed in terms of the doctrine of part performance, was also concerned with the concept of equity operating to prevent unconscionable reliance on the Statute of Frauds.
90. In relation to part performance, the judgment merely refers to “the plaintiff’s argument on part performance” without stating what that argument was. However, I am prepared to infer that the same argument as was advanced before us in that regard was made before the High Court, namely an argument based on the passage quoted earlier in this judgment ( at para 70) from the judgment of Lord Simon in Steadman v Steadman as approved in Mackey v Wilde (No 2).
91. It has been argued on behalf of Yolanda that Mackey v Wilde (No 2) cannot apply in the circumstances of this case, as part performance is only available in respect of contracts that are capable of specific performance. It is said the alleged contract in this case is incapable of specific performance, first, because it is not a contract in relation to the sale of land, and, secondly, and in any event, because the plaintiff’s claim is framed as a claim for damages, alternatively a claim for monies had and received, and specific performance is not sought.
92. Yolanda’s claim that part performance is only available in respect of contracts for the sale of land is based on certain remarks of Fennelly J in Dakota Packaging Ltd v AHP Manufacturing BV [2005] 2 IR 54.
93. In that case the facts were that, from 1993, the plaintiff had supplied the defendant with specialised packaging for its products. It was subsequently awarded the status of preferred supplier and from 1998 the level of business between the parties increased considerably. In 2003, having put in place alternative sourcing plans for the plaintiff’s product, the defendant informed the plaintiff that it would cease to place orders with it and gave it six months notice of termination of business during which time it would place such orders so as to use up any materials which the plaintiff had already in stock. The plaintiff instituted proceedings claiming, inter alia , a declaration that it was entitled to a minimum of 18 months notice of termination and asking the court to imply same into the business relationship between the parties. The defendant submitted that there was no contract between the parties containing either express or implied terms of the kind contended for by the plaintiff. However, it also argued in the alternative that, on the basis of s. 1 of the Statute of Frauds 1695, the contract which the plaintiff claimed to exist was unenforceable, it not being in writing. The plaintiff in turn asserted that the Statutes of Frauds did not operate to defeat its claim as it was entitled to rely on the doctrine of part performance.
94. The plaintiff succeeded in the High Court. The defendant appealed to the Supreme Court. The Supreme Court allowed the appeal finding an error on the part of the trial judge who having found there was no contract had nevertheless gone on to imply a term requiring notice into what he had referred to as the “arrangement” or “relationship” between the parties. Having so found, Fennelly J, with whose judgment Murray C.J., and Hardiman J indicated agreement, indicated that “[s]ince that is sufficient to determine the appeal it is not strictly necessary to comment further” However, he did nevertheless proceed to briefly consider the other defences that had been advanced by the defendant, and in relation to the contention that the plaintiff’s claim would in any event have been defeated by the provisions of Statute of Frauds, he observed (obiter dictum):
“There was an interesting discussion as to the status, in Irish law, of the doctrine of part performance in the cases of contracts of this type. English caselaw, before the requirement was abolished, appeared to hold that the doctrine applied only to contracts for the sale of land (see Britain v. Rossiter (1879) 11 Q.B.D. 123; Maddison v. Alderson (1883) 8 App. Cas. 467). Palles C.B., on one view, declined to follow these cases in Crowley v. O’Sullivan [1900] 2 I.R. 477. More recently, however, Barron J., speaking for this court, and referring to Maddison v. Alderson, stated in Mackey v. Wilde (No. 2) [1998] 2 I.R. 578 at p. 587 that in “all the earlier cases, it was assumed that the acts of part performance must necessarily relate to and affect land.” The conclusion in the present appeal is that there was no contract, so the question of the need for writing does not arise. Accordingly, it seems better to leave that, as well as a point concerning the absence of writing to satisfy the Sale of Goods Act 1893 for debate on another day.”
95. It seems to me that what this indicates is that the law is at present uncertain on the point at issue. Yolanda might well be correct in the position they contend for, but that is not to say that the position that D & L contends for, namely that it is in fact legally possible for it to rely on part performance, is not at least capable of being argued. In the absence of any clear modern Irish authority on the point I could not predict with confidence and certainty that D & L would be precluded from relying on part performance for the legal reason just advanced.
96. The law is also far from clear on whether the possibility of relying on part performance is to be confined to only those cases where the contract is capable of specific performance.
97. These issues require to be argued fully and properly, and determined, and a motion invoking the inherent jurisdiction of the court for the purpose of seeking to have proceedings struck out provides an inappropriate vehicle within which to do so.
98. Indeed, the undesirability of using summary procedure for difficult points of law was emphasised by Keane J stated in Irish Permanent Building Society v. Caldwell [1979] ILRM 273, when he stated (at 276/277):
“The question I have to decide is as to whether the proceedings should be struck out in limine at this stage. It has been said on high authority that the procedure sought to be invoked in the present case should not be applied ‘to an action involving serious investigation of ancient law and questions of general importance: per Cozens-Hardy MR in Dyson v Attorney General [1911] 1 KB 410 at 414. The issues raised by the present proceedings involve difficult questions as to the relationship of the present Constitution to the pre-existing law concerning the assertion of public rights by a person other than the Attorney General. It can, of course, be said, as is urged with much cogency by Mr O’Neill SC on behalf of the applicants, that such questions can be resolved on the present application adversely to the plaintiffs simply on the pleadings as they stand. But, if one has regard to the practicalities of litigation in our courts, it seems to me undesirable that such a question should be finally resolved, at least so far as the High Court is concerned, in a summary manner on an application of this nature. I do not overlook the fact that the English procedure is different to this extent, that an application of this nature is made in chambers and cannot be the subject of an appeal. By contrast, under our procedure, the decision of the court on an application of this nature would, I think, be manifestly susceptible to an appeal to the Supreme Court. Despite these considerations, I am not satisfied that, on an application of this nature, the High Court should finally determine the difficult and complex question of law involved. I think that the plaintiffs are entitled to a full and unhurried consideration of the questions they have posed for a resolution by the High Court and that this cannot, in a practical manner, be achieved within the limitations of a motion such as the present.”
99. In so far as the second point, based on the manner in which the claim has been pleaded, is concerned it seems to me that, while D & L might well have something of an uphill battle to persuade a court to do so, and also for its own reasons might very well not wish to do so, it would nonetheless be theoretically open to it to seek an amendment to its statement of claim to include a claim for specific performance such as would allow it to overcome the objection being made. There is authority, previously alluded to (at para 47 ante), for the proposition that an action should not be dismissed if the statement of claim admits of an amendment that would save it, and the action founded on it.
100. Proceeding therefore on the basis that it might be legally possible, at least in principle, for D & L to seek to rely on part performance, it is necessary to consider how the High Court judge in fact approached and dealt with that issue.
101. Once again, the High Court judge considered that the evidence suggestive of part performance was “enough” to justify refusal of the application to strike out under the inherent jurisdiction of the court on the basis that the action was bound to fail. The alleged part performance was the advancement of the sum of €2.2 million to Yolanda, which undoubtedly occurred, although a major factual dispute still exists as to whether those monies were advanced by Derek O’Leary on his own behalf as lender or, as is now claimed, effectively as an agent for D & L.
102. In this instance I find it hard to see how such a factual dispute could be resolved other than in the context of a plenary hearing, and if that be so then the High Court judge taking, as he was obliged to, the plaintiff’s case at its height was ostensibly justified in concluding that “enough” (as he put it) had been put forward in support of the plaintiff having at least an arguable case that the Statute of Frauds could be disapplied in the circumstances of the case. That being so, it could not be said that D & L’s case was “bound to fail”. It seems to me, therefore, that the High Court judge was correct in asserting:
“If there was part performance there is an issue as to whether it was by the plaintiff or by Mr. O’Leary, who is not a party to these proceedings. But in the light of the plaintiff’s assertion that it was understood between the parties that Mr. O’Leary was only making a loan on behalf of the plaintiff and that this was understood by the parties, I believe that this is a matter which should be permitted to go to trial and be tested in the light of the evidence produced in court.”
103. It also seems to me that at least an arguable case is capable of being advanced by D & L based upon acquiescence and (promissory) estoppel; although in truth it might be characterised as just another facet of the case based on part performance. Nevertheless, regardless of how one characterises it, in circumstances where the possibility that D & L could persuade a court of trial that the Statute of Frauds should be disapplied on equitable grounds amounting to an estoppel cannot be discounted, once again it cannot be said that the plaintiff’s case is bound to fail.
104. In arriving at these conclusions I have fully taken on board all of the criticisms made by Yolanda concerning the evidence relied on in support of D & L’s contention that it was understood that Mr O’Leary was acting merely as an agent for D & L, and not least in that regard the fact that in much of the documentation Mr O’Leary is expressly described as being the lender, and also the fact that nowhere in the accounts of D & L is a loan by that company to Yolanda reflected. Nevertheless, while the weight of the evidence might appear to be against D & L on this issue at this point in time, it cannot be said that D & L’s case is unstateable. It is also relevant that D & L has yet to obtain discovery from Yolanda, albeit that no deponent on behalf of D & L has expressed any optimism that discovery is likely to advance matters materially. While it is probably fair to characterise D & L’s position as being more one of hope than of expectation that something to assist it’s case will turn up on discovery, it cannot be gainsaid that as a matter of likelihood D & L will be entitled to discovery of relevant documents, and nothing can be taken for granted in circumstances where discovery has not yet been made.
Conclusions
105. In all of these circumstances I believe the High Court was correct not to strike out the proceedings as being bound to fail, and I would dismiss the appeal.
O’Connor -v- P. Elliott and Company Ltd
[2010] IEHC 167 (04 March 2010)
JUDGMENT of Mr. Justice Roderick Murphy delivered on the 4th day of March, 2010.
1. Background
The plaintiff’s claim is for specific performance of a contract which he alleges was made between him and the defendant on 27th February, 2007, by way of oral agreement which was evidenced in writing on 5th June, 2007 in respect of the sale of the plaintiff’s premises at 1A and 2, Usher’s Quay, at the corner with Usher Street, in the City of Dublin to the defendant company for the sum of €960,000, €100,000 of which was in respect of the subsoil. Mr. O’Connor alleges that correspondence from the defendant’s solicitor of that date and of 18th July, 2007, notwithstanding that both were marked “without prejudice”, constitutes a memorandum for the purpose of the Statute of Frauds.
By way of background the property had been owned by the plaintiff’s family for many years and had been the location of the family’s printing business which was taken over by the plaintiff on the death of his father. The plaintiff at all material times owned the property, having inherited the business from his father and having bought out the interest of his siblings in the property following the death of his parents.
The possibility of entering into an agreement with the defendant for the development of the property arose on foot of a previous approach by the defendant to the plaintiff in late 2004. Negotiations ensued and a development agreement was entered into between the parties in January 2005 which is referred to in the Statement of Claim. At that time the defendant was in the process of developing lands and premises formerly known as the Abbey Garage, No. 3 – 10 Usher’s Quay, Dublin 8, and had approached the plaintiff with a proposal for the sale and development of his adjoining property.
That agreement provided, inter alia, that the plaintiff would not object to the defendant’s actual and/or proposed application for permission to develop the adjoining property and that both the plaintiff’s property and the adjoining property would be developed together.
Early in 2006 it was agreed between the plaintiff and the defendant that the development agreement would be varied so that the property and adjoining property would be developed separately. In the course of 2006 and 2007 the defendant commenced works and substantially completed the development of the adjoining property.
The plaintiff alleged that, in consequence of the said works, the plaintiff’s right to light on the east side of the property was obliterated and it was further claimed that the works had severely disrupted the business of the plaintiff.
On 26th January, 2007 the defendant indicated that it no longer intended to honour the agreement between the parties but, following further discussion and negotiations, a meeting was held at the Merchant Café on 27th February, 2007, recorded in an e-mail from Mr. Mark Elliott, a director of the defendant company, whereby the plaintiff agreed to sell and the defendant agreed to purchase the property for the sum of €860,000 subject to conditions that were discussed at a meeting of 3rd April with the parties’ solicitors and which were set out in a letter from the solicitors for the plaintiff dated 25th May, 2007, subject to modifications on 28th May, 2007. No reference was made to an easement to develop the subsoil at that stage.
The plaintiff claims that, by letter of reply from the solicitors for the defendant dated 5th June, 2007, and in certain subsequent correspondence, the oral agreement of 27th February, 2007 became enforceable for the purpose of the Statute of Frauds.
2. Correspondence
The plaintiff’s solicitors’ letter of 25th May, 2007 set out details of the agreed transaction as understood by their client in relation to 1A and 2 Usher’s Quay and the development at Mellowes Quay. Under the heading of “disturbance” it was stated that compensation in the sum of €22,500 would be paid to the plaintiff at the same time as the consideration of €860,000 and that further consideration in respect of the basement/subsoil was to be paid to him.
The defendant was to block up the property at 1A Usher Street and ensure that 2 Usher Street continued to be fit for the plaintiff’s company, Dot Binding & Labels Ltd., to operate its business until such time as redevelopment commenced.
The plaintiff was to seek tax advice and, if changes were proposed which improved the tax position of the plaintiff, then the defendant would act reasonably towards accepting such changes.
Valuers were to meet to commence negotiations regarding consideration for the basement/subsoil.
No building work, which would interfere with the plaintiff’s light, was to be carried out until such time as the defendant had acknowledged and accepted terms of the agreement and once compensation for the basement had been agreed and finalised.
The reply of 5th June, 2007, was in response to that letter. In relation to 1A and 2 Usher’s Quay, six out of eight of the terms contained in the letter of 28th May were agreed. It was not agreed that the defendant be responsible for the maintenance of the plaintiff’s property and ensuring that it would be fit for the purpose of carrying out the business of Dot Binding & Labels Ltd.
It was agreed that the deed of easement proposed to be granted to the defendant in respect of the redevelopment of 1A and 2 Usher’s Quay, above ground level, should not be assigned to a third party without the consent of the plaintiff, which consent would not be unreasonably withheld.
In relation to the Mellowes Quay development all three of the terms contained in the plaintiff’s letter were agreed.
The terms relating to disturbance were agreed as discussed in a telephone conversation. The maintenance was, as indicated above, not agreed and the tax advice was noted and agreed.
The letter of 18th July 2007, headed as indicated, “without prejudice”, referred to previous correspondence and stated:
“we confirm that all matters have now appear (sic) to be agreed between our clients. However on going through our letter of 5th June, 2007, we would comment as follows:
1 and 2 Usher Street:
(1) You might please let us have a draft deed of easement and building licence.
(4) You might please confirm exactly what work your client now expects to be carried out to the premises…
(8) The agreed figure is now €100,000.
Tax advice:
You might please confirm if your client has obtained advice in relation to the structure of the transactions and you might please let us know the consequences of any such advice.
We look forward to hearing from you.”
Number 4 above in relation to 1A and 2 Usher Street refers to the ongoing maintenance and the work that was to be carried out to the plaintiff’s premises.
Number 8 referred to the consideration for the easement to develop the subsoil which was then agreed.
The letter of 18th July, 2007, was preceded by a fax from the solicitors for the plaintiff, to the solicitors for the defendant, which stated as follows:
“Billy,
I note from your message that all matters are now agreed between the parties. However, I would like to tie down a time scale for finalisation of the deed of easement and payment of consideration to Paddy [O’Connor]. Perhaps you would come back to me on this as soon as you can take instructions from your client.
Regards,
Fiona Thomas
Taylor and Buchalter”
The plaintiff’s solicitor enclosed an initial draft of a licence agreement for the defendant’s solicitors’ consideration, requested maps to identify the licensed premises and the retained premises, and wished to establish a tie frame for finalisation of all matters. On 20th September a reminder of the request for time line for finalisation of documents and payments was sent and on 27th September the plaintiff’s solicitor wrote that their client was most disappointed that little or no progress had been made in relation to the matter since 18th July.
On 20th September the plaintiff’s solicitor sent the defendant’s solicitor a fax stating that the plaintiff had to borrow money to buy out his family members’ interests and that he needed to proceed with the transaction as soon as possible in order to discharge that debt.
The defendant’s solicitors’ fax of 27th September explained that he had been away until the previous Monday and was catching up and would respond to the draft licence agreement the following week.
On 12th October, 2007, a letter from the defendant’s solicitors headed “without prejudice” referred to the draft licence agreement and suggested that it might be “a situation that an outright purchase by way of long lease would be more appropriate”. A request was made for confirmation that the plaintiff’s tax advice would not affect the structure of the transaction. A request was also made for a push and call option agreement. Documents, including a booklet of title, form of building contract, building specification service charge, home bond documentation and a Land Registry approved scheme map, were sent to be held in trust pending completion.
By fax of 23rd November, 2007 the defendant’s solicitor wrote:
“Subject to contract/contract denied.
‘Hi Fiona,
I spoke to Mark [Elliott] about the basement and his clear understanding is that the basement figure of 100,000K is paid over only if it is developed and is used for commercial purposes, other than car parking. Can you please take instructions on this.
In the meantime I attach an initial and very rough draft lease which my client has not seen so I must fully reserve the right to make amendments.
I look forward to hearing from you with draft option agreement as discussed.
Regards,
Billy Parker,
Whitney Moore”
This was the first correspondence made “subject to contract/contract denied”.
By letter of 12th December, 2007, the plaintiff’s solicitor referred to the basement and to the defendant’s solicitor’s letter of 18th July, 2007. The letter continued:
“At all times it was acknowledged that the ‘further’ or ‘additional’ sum of €100,000 was being paid in respect of our client allowing your client to develop the basement and subsoil below the premises. At no time was it ever suggested that the payment of this sum be deferred until development occurred. In fact, we note that in your definition of the ‘demised premises’ in the draft lease, you are including the subsoil below the premises. Clearly, the reason for engaging valuers to value the basement area at current market value was so that the consideration being paid at this juncture would include the additional €100,000. Our client is not willing to re-negotiate this issue. If your client does not wish to pay the additional sum of €100,000 then all references to the basement and subsoil should be removed from the draft lease.”
By fax dated 11th January, 2008, the defendant’s solicitors told the plaintiff’s solicitors that they expected completion at the beginning of February to be realistic. However it was further stated that:
“One point which I know will not be agreed and that is any compensation if there is no development within ten years. Your client’s option is to call upon our client to purchase the premises at that stage.”
By letter dated 25th February, 2008, from the defendant’s solicitors, headed “without prejudice”, it was stated that two significant commercial issues between the parties needed to be resolved before proceeding with the legal documentation. The defendant never envisaged paying a sum of €100,000 in respect of the basement at that time. That would only arise in the event of redevelopment of the property and the actual use of the basement. The letter continued:
“We note your client is not willing to re-negotiate this issue. However our client’s position is similar and they are not prepared to re-negotiate.”
The second issue regarded redevelopment. The letter stated:
“We do not understand your reference to a further agreement whereby our client compensates your client in the event that the property is not developed within ten years. Your client’s compensation comprises the ability, the end of ten years, if the property is (sic) not been redeveloped to call upon our client to acquire the property from your client at market value. There is no question of any further compensation being paid to your client.
In respect of the first matter the plaintiff’s solicitors on 29th February, 2008 stated that it was willing to give options with regard to the basement either to pay the €100,000 at that stage or at a later date subject to a valuation being carried out at that stage and was willing to agree on the issue of redevelopment.
On 5th March, 2008, the defendant’s solicitors, by fax, said that the basement was a real issue and suggested a “very reluctant compromise” in that the defendant agreed to a payment on a restricted basis where there was planning for commercial use other than car parking and that development had taken place.
By 6th March, 2008, the plaintiff’s solicitors gave notice of issue of proceedings seeking a specific performance of the agreement unless the defendant confirmed that it would take all necessary steps to specifically perform all aspects of the agreement.
On 20th June, 2008, a plenary summons was served.
The above outlines the sequence of events in which correspondence was sent by the defendant “without prejudice” followed by subsequent lengthy correspondence, up to the fax of 5th March, 2008, referred to above, which was headed “subject to contract/contract denied”, – as was the fax of 23rd November, 2007.
3. Preliminary issue: admissibility of “without prejudice” correspondence
Both the letter of 5th June, 2007 and that of 18th July, 2007, relied on by the plaintiff as constituting a written memorandum to satisfy the Statute of Frauds, were headed “without prejudice”.
The defendant contended that the parties were in dispute at the time of that correspondence because the plaintiff had indicated, in the course of May 2007, that his original forbearance in declining to object to the defendant’s construction works might be reversed, and action taken accordingly, if the development agreement was not concluded as originally agreed and foreseen. Accordingly, it was submitted that this correspondence should not be admitted.
The plaintiff submitted that the existence of a possible related dispute did not transform a letter written in the absence of a dispute into a letter attracting the “without prejudice” privilege. In particular, the underlying policy and rationale of the privilege was not engaged by the consideration that a right to light issue had arisen in the context of negotiations and was revived in the context of calls for the agreement to be formally concluded. The right to light issue was the subject of detailed open correspondence on the part of the defendant in its open letter of 17th May, 2007. The plaintiff submitted that it was difficult to see how the same “dispute”, the subject of open correspondence, could invest the correspondence relating to the agreement (and evidencing that agreement) with the necessary quality of privilege.
In this submission of the plaintiff, the defendants reliance on the “without prejudice” nature of correspondence as investing that correspondence with the quality of protection afforded in a pre-contractual negotiation by the phrase “subject to contract/contract denied”, was conflating a rule of evidence with a special rule of contract law. The “without prejudice” rule and the “subject to contract” rule applied in different contexts for wholly different reasons and were supported by wholly different policy considerations.
The plaintiff contended that the two letters, of 5th June and 18th July, 2007, were not protected by the “without prejudice” privilege on the grounds, first, that these were not communications in the context of a dispute or negotiation of settlement of a dispute, and, further, that these letters fell within the well-established exception to the “without prejudice” rule in respect of correspondence evidencing the existence of a concluded agreement.
Reference was made to Parker L.J. in South Shropshire District Council v. Amos [1987] 1 All E.R. 340, at 344, where it was held that the heading “without prejudice” did not conclusively or automatically render a document so marked privileged.
In O’Flanagan v. Ray-Ger Ltd. [1983] WJSC-HC 3316, Costello J. stated that “[T]hese words alone possess no magic properties and some more substantial grounds had to be found to justify the defendants’ objection to the admissibility of this letter”.
Keane C.J. in Ryan v. Connolly [2001] 1 IR 627, at 631, stated that it was clear from Cutts v. Head [1984] 1 Ch. 290 and other authorities that the presence of the heading “without prejudice” does not automatically render the document privileged. The Court was entitled to look at the document in order to determine whether it was of such nature as to attract privilege.
The plaintiffs submit that the rule is actually a privilege that forms part of the general law of evidence and was based on public policy. Reference was made to McGrath on Evidence, (Thomson Round Hall, 2005) paras. 10-111 at pp. 574-5:
“In order for a claim of privilege to succeed, the party claiming it must establish that the communication in question was made (i) in a bona fide attempt to settle a dispute between the parties; and (ii) with the intention that, if negotiations failed, it could not be disclosed without the consent of the parties …”
McGrath continues (para. 10-113 at pp. 74):
“The party seeking to assert privilege must show that at the time the communication was made, a dispute existed between the parties in respect of which legal proceedings had commenced or were contemplated and the communication was made in a genuine attempt to further negotiations to settle that dispute. The fact that a communication concerns a dispute between the parties is not sufficient to confer privilege – it must be made in furtherance of the settlement of the dispute. This is clear from the decision of Costello J. in O’Flanagan v. Ray-Ger Ltd.”
Reference was also made to Lord Mance in Bradford & Bingley v. Rashid [2006] 1 WLR 2066 at para. 87 of his judgment:
“…it is wrong to assimilate the express use or effect of the phrase ‘without prejudice” in a context where there is no dispute or attempt to compromise a dispute with the significance of the ‘without prejudice’ rule which applies, or of the ‘privilege’ which exists, where there is an attempt to compromise a dispute. I am unable therefore to agree with my noble and learned friend Lord Brown’s statement at para. 63 that ‘generally speaking’ communications marked ‘without prejudice’, will ‘attract the privilege even without the public policy justification of encouraging the parties to negotiate and settle their disputes out of court’. It is not open to a party or parties to extend at will the reach of the ‘without prejudice’ rule or of the ‘privilege’ as regards admissibility or disclosure.”
As stated in Abrahamson, Dwyer & Fitzpatrick, Discovery and Disclosure (Thomson Round Hall) (2007) at para. 36-22, statements made during negotiations may be admitted where they do not relate to the substance of the dispute.
In McGrath, on Evidence at para. 10 – 130, the matter is put in the following way:
“If negotiations succeed the reasons for non-disclosure ceases and the fact of the compromise is admissible. Further, “without prejudice” communications are admissible if a question arises as to whether they have resulted in agreement, whether a settlement document reflects what was actually agreed between the parties, or whether they give rise to an estoppel.”
In Cutts v. Head [1984] Ch 290, at 310, Oliver L.J. said that the policy protects negotiations “whilst liability is still an issue”, and in consequence it will apply, as a general rule, where the negotiations have been unsuccessful, but where these negotiations lead to a concluded agreement the “without prejudice” documents will be admitted in evidence to prove the existence and terms of that concluded agreement.
Danckwerts L.J. in Tomlin v. Standard Telephones and Cables [1969] 3 All E.R. 201, at 203-4, referred to Lindley L.J. in Walker v. Wilsher [1889] 23 Q.B.D. at 335:
“What is the meaning of the words ‘without prejudice’? I think they mean without prejudice to the position of the writer of the letter if the terms he proposes are not accepted. If the terms proposed in the letter are accepted a complete contract is established and the letter, although written without prejudice, operates to alter the old state of things and to establish a new one.”
Danckwerts L.J. categorised that statement as a great authority and it seemed to him to apply where there was a binding agreement or an agreement intended to be binding, reached between the parties. He held that not only was the court entitled to look at the letters although they were nearly all described as ‘without prejudice’, where the intention of the parties was that there was a binding agreement contained in the correspondence.
4. Ruling of the Court
The Court is satisfied there was no genuine dispute or negotiation to settle a dispute. The use of the phrase “without privilege” should not inadvertently immunise acts from their normal legal consequences. McGrath on Evidence, at paras. 10-116 to 10-119, has analysed the cases which underlie that conclusion.
The letters written by the defendant’s solicitors on 5th June, 2007 and 18th June, 2007 and other such letters headed “without prejudice” were not written in the context of a settlement of a dispute between the parties. The parties would appear to have been in agreement on the essential elements on the deal and indeed in relation to compensation for disturbance.
Having reviewed the authorities it seems to the Court that the “without prejudice” correspondence on behalf of the defendant, in particular the letters dated 5th June, 2007 and 18th July, 2007, are not protected by the “without prejudice” privilege and are relevant and ought to be admitted in evidence as proof of the agreement of the parties at issue in the proceedings.
Such a ruling is relevant to the determination of whether there was a concluded agreement.
5. What was agreed?
The plaintiff maintains that most of the essential elements of the agreement were agreed at the meeting between Mr. O’Connor and Mr. Elliott on 27th February, 2007, at the Merchant Café. That meeting had taken place at the request of Mr. Elliott following a demand on the part of Mr. O’Connor that works on the adjoining site, which Mr. O’Connor had permitted as part of a previous arrangement between the parties which was not honoured by the defendant company, should cease forthwith. The meeting lasted for 3½ hours. Mr. Elliott reduced the parties’ then agreement to writing and forwarded it that afternoon by email to the plaintiff with an indication that, once Mr. O’Connor confirmed he was happy with it, it would be forwarded to the defendant’s solicitor.
Six headings were included in that summary of the discussion as follows:
(1) 1A and 2 Usher Street to be purchased for the amount of €860,000 calculated by reference to 8 apartments at €107,500 each. The transaction to take place as soon as possible with a caretaker’s agreement and an option to Mr. O’Connor to purchase the ground floor commercial unit in a new development for €250,000.
(2) Mellowes Quay development: Mr. O’Connor could buy a specified apartment together with a commercial unit on Usher Street with specified finishings and two car parking spaces.
It was agreed that the transaction in respect of 1A and 2 Usher Street would take place as soon as possible and that contracts for the Mellowes Quay development would be completed as that development was completed.
(3) A Meeting was proposed for 5th March to progress the matter.
(4) The solicitors were identified for each party.
(5) Tax advice: if changes were proposed following on Mr. O’Connor’s receipt of tax advice then Elliott’s would act reasonably towards accepting these changes.
(6) Moving out: the defendant would give labour assistance to Mr. O’Connor to move out of his premises.
The note was not signed by or on behalf of the defendant.
The plaintiff’s solicitor wrote on 10th April, 2007 subject to contract and on 11th May, asking for confirmation as to whether or not the defendant was willing to formalise the agreement and requesting that the defendant would do no work which would deprive the plaintiff’s property of light until such agreements had been formalised in writing. The plaintiff’s solicitors’ letter of 15th May, 2007 stated that Mr. O’Connor was of the view that the consideration for the basement should only be payable if and when the defendant obtained planning permission for a basement and that consideration should amount to €250,000, index linked, payable within a definite period after the granting of such permission.
The defendant’s solicitors wrote an open letter on 17th May, 2007 in relation to the right to light, saying that any diminution of the plaintiff’s light was of a minor nature only and that they were prepared to compensate for such diminution or, in the event of their client’s being unable to agree, to refer the matter to arbitration.
The plaintiff’s solicitors wrote on 18th May, 2007 saying that the defendant’s offer of €20,000 in respect of the basement was not acceptable but that their client was satisfied that the matter proceed in all other aspects. Their client was not in agreement that the deprivation of light was of a minor nature.
On 22nd May, 2007, solicitors for the defendant agreed to the issue of the valuation of the basement being dealt with as the plaintiff suggested and referred to the plaintiff selecting one of three valuers.
On 25th May, 2007, the plaintiff’s solicitors, as requested, set out details of the agreed transaction as understood by their client. This was a modified version of the note of the 27th February meeting. The valuation of the basement was to be agreed between the parties with valuers assisting the negotiations.
Compensation for disturbance was also, as from the letter of 28th May, 2007, to be agreed between the parties.
The letter of 5th June, already referred to above, followed.
That letter, which was headed “without prejudice”, agreed all but three matters.
The first of these was that the defendant would be responsible for the maintenance of 1A and 2 Usher Street and to ensure that it would be fit for the purpose of carrying out the business of the plaintiff’s company. The parties were to meet on the premises to discuss exactly what work would be carried out to the premises. This would appear to have been a matter of detail and not of substance.
The second matter, relating to the deed of easement granted to P. Elliott & Co. Ltd. in respect of the redevelopment of 1A and 2 Usher Street not being assigned to a third party without the consent of Mr. O’Connor, was not agreed but the defendants understood that the request related to a situation where their client might seek to assign its obligations under the proposed agreement with the plaintiff. It was agreed that the plaintiff could approve of such assignment. No further proposal was made by the plaintiff and, in such circumstances, it would appear that there was agreement on this point.
The third matter was disturbance and it would appear that, following a subsequent telephone conversation, that this matter was agreed as discussed.
By letter dated 5th July, 2007, the plaintiff’s solicitors wrote to the defendant’s solicitors noting that “most issues have now been agreed”. It is not clear what issues remained outstanding given that the additional €100,000 in respect of the granting of an easement for the development of the basement was agreed.
By 16th July, 2007, the plaintiff’s solicitors asked for confirmation of the agreement which had been reached almost two weeks beforehand. They confirmed by lunchtime the following day. The defendant’s solicitors message acknowledged that all matters had now been agreed between the parties and asked for a time scale for finalisation of the deed of easement and payment of consideration to the plaintiff.
By letter of 18th July, 2007, the defendant’s solicitor wrote to the plaintiff’s solicitor a second “without prejudice” letter. Referring to previous correspondence they confirmed that all matters “now appear to be agreed between our clients”. They continued: “However on going through the letter of 5th June, we would comment as follows:
1A and 2 Usher Street:
1. You might please let us have a draft deed of easement and building licence.
4. You might please confirm exactly what work your client now expects to be carried out to the premises.
8. The agreed figure is now €100,000
Tax Advice:
You might please confirm if your client has obtained tax advice in relation to the structure of the transactions and you might let us know the consequences of any such advice.
Two points remained: that of the work that the plaintiff expected to be carried out on the premises and the consequences of tax advice. The latter point was agreed in that the defendant would “act reasonably towards accepting these changes.” It was more an issue of the mode of implementing the transfer rather than a matter of substance.
The issue of confirming exactly what work the plaintiff expected to be carried out does not appear to have been addressed by the parties and appeared to have been a matter of detail.
6. Was there a concluded agreement?
In view of the above correspondence it would appear that the parties, through their respective solicitors, were ad idem as to the substantial terms of the contract.
However, the interest which was to be transferred to the defendant in respect of 1A and 2 Usher’s Quay and the interest the plaintiff would receive from the defendant in respect of the apartments at Mellowes Quay were never specified.
Notwithstanding this, the Court is satisfied that there was an agreement in writing by 18th July 2007.
The sequence of letters already detailed above may be summarised as follows:
On 17th May, 2007, Whitney Moore offered €20,000 and refused the plaintiff’s request for €250,000 which was confirmed on 18th May, 2007, but was agreed on 22nd May, 2007, to be referred to a valuer. On 25th May the plaintiff’s solicitor referred to €860,000 for an easement to development above ground level. By 5th June that was agreed. On 5th July the plaintiff’s solicitors noted that the defendant had agreed an additional sum of €100,000 for the development of the basement and on 18th July, 2007, that figure was agreed by the defendant.
7. Subsequent correspondence
Reminders were sent on 13th September, 20th September, and on 27th December, 2007.
By email dated 27th September, the defendant’s solicitors apologised for missing the plaintiff’s solicitors’ calls as he had been away until the previous Monday and was catching up and would respond to her draft licence agreement the following week. On 5th October it was noted that the plaintiff desisted from seeking injunctive relief on the basis of the terms of agreement which were agreed between the respective clients on 18th July. The defendant’s solicitor said that he would definitely have instructions the following week and understood that the transaction could take place immediately once the documentation was agreed and the plaintiff had his tax structure in place. Further reminders were sent to the defendant’s solicitors.
The Court has already noted that tax advice relating to the mode of transfer would be agreed. It was not an issue affecting the existence of the contract.
On 23rd November, 2007, and 27th November, 2007, an email headed “subject to contract/contract denied” was received from Whitney Moore stating that Mark Elliott’s clear understanding was that the basement figure of €100,000 would be paid over only if the basement was developed and used for commercial purposes other than car parking.
The development of the subsoil referred to in the plaintiff’s solicitor’s letter of 25th May, 2007, was agreed in the “without prejudice” letter of 5th June from Whitney Moore. However, the figure agreed in the defendant’s solicitors’ subsequent letter of 18th July was €100,000. There was no indication of the timing of such payment. The plaintiff’s solicitors replied the same day saying that they were taking the plaintiff’s instructions and would revert the following day.
On 12th December, 2007, the plaintiff’s solicitors wrote that at all times it was acknowledged that the “further” or “additional” sum of €100,000 was being paid in respect of the plaintiff allowing the defendant to develop the basement and subsoil below the premises. At no time was it ever suggested that the payment of this sum be deferred until development occurred. The definition of “demised premises” in the draft lease included the subsoil below the premises. Their client was not willing to renegotiate that issue. If the defendant did not wish to pay the additional sum of €100,000 then all reference to the basement and subsoil should be removed from the draft lease. The letter referred to the plaintiff’s solicitors’ letter of 5th July 2007 noting the agreement in respect of the plaintiff’s granting of an easement to the defendant for the development of the basement and subsoil under 1A and 2 Usher Street. Whitney Moore’s letter of 18th July 2007 confirmed the figure to be €100,000.
It was clear that the issue of the basement became a “real issue” on the 5th March, 2008 when the defendant’s solicitors wrote “subject to contract/contract denied” and stated:
“As you may recall my client was on the verge of ending all discussions when the issue of payment for the basement was raised by your client.”
The message continued:
“As a very reluctant compromise my client agreed to a payment but on a very restricted basis. That is that there must be planning for commercial use. If there was only planning for car parking they would not pay as it would not have any value for parking.
On this basis they feel there will be no payment to your client unless and until there is planning for commercial use in the basement and the basement is developed accordingly. If this happens, your client will get €100,000.
My clients are very clear and insistent on this point and I can only suggest that your client contact my client to discuss the matter further.”
Proceedings followed this exchange.
The e-mail of 11th January, 2008, from the defendant’s solicitors was headed “subject to contract/contract denied” and envisaged completion in February as being realistic. The e-mail continued referring to a point which the writer knew would not be agreed. “…that is any compensation if there is no redevelopment within the ten years. Your client’s option is to call upon our client to purchase the premises at that stage.”
The Court notes that this email and that of 23rd November, 2007, were headed “Subject to contract/Contract denied”.
In addition the letters of 12th October and 7th November from Whitney Moore were headed “without prejudice”.
The Court has already ruled on the issue of “without prejudice” in relation to the communications between the parties.
The issue of “subject to contract/contract denied” is, of course, different.
It is clear that negotiations in 2005 headed “strictly subject to contract/contract denied” have no relevance to the present case as they related to negotiations leading to the previous development agreement. The discussions in February 2007 and eventually the alleged agreement in issue in this case, could not, in the view of the Court, be covered by the “subject to contract” provisions in that development agreement.
The Court also notes that the plaintiff’s solicitors’ letter of 10th April, 2007 in relation to the agreement in issue was “subject to contract”. That letter indicated that there was agreement in principle to all aspects of the matter other than in relation to the basement. Her further open letter of 11th May, 2007 referred to the formalisation of the agreement which was, on the defendant’s solicitor’s invitation, expressed in her letter of 25th May which was responded to by the defendant’s solicitor’s letter of 5th June 2007.
That open correspondence (albeit in part made “without prejudice”) removed the “subject to contract” element.
The Court recognises the general rule that there is no concluded agreement until such time as written contracts have been exchanged (see McDermott; Contract Law, Butterworths (2001) at 81 and Winn v. Bull (1877) 7 Ch. D 29). The exception to that general rule is where there is already a concluded oral agreement of which there is an adequate note or memorandum to satisfy the Statute of Frauds (Ireland) 1695 or where there are sufficient acts of performance. (McDermott, Op cit., Kelly v. Park Hall School Ltd. [1979] I.R. 340; Mulhall v. Haren [1981] I.R. 364; and Boyle v. Lee [1992] 1 I.R. 555.)
More recently Hardiman J. stated in Supermac Ireland Ltd v. Katesan (Naas) Ltd. [2001] 1 ILRM 401, [2000] I.R 273 (at 281):
“In my view, it is plainly arguable that the use of this rubric by the solicitors does not preclude the existence of a ‘done deal’ between the parties themselves, which the plaintiffs contend for. Insofar as it is contended that the plaintiffs are estopped by the use of the rubric from asserting a completed and enforceable agreement, this seems to be plainly a matter for evidence at the trial.”
Keane J. (as he then was) in Jodifern Ltd. v. Patrick Fitzgerald and Margaret Fitzgerald [2000] 3 IR 321 held (at 328):
“…[P]rovided a document exists which is capable of constituting a note for memorandum sufficient to satisfy the Statute of Frauds and which does not contain the words ‘subject to contract’ the principles laid down by this court in Boyle v. Lee [1992] 1 I.R. 555 do not apply, as was made clear by the judgment of O’Flaherty J. in the latter case.”
Keane J. concluded by remarking that the claim and submissions rested unequivocally on the two agreements for sale and not on subsequent correspondence protected as it was by the use of the formula ‘subject to contract/contract denied’.
8. The authority of the solicitor for the defendant
In Guardian Builders Ltd. v. Patrick Kelly, (Unreported, High Court, 31st March, 1981), Costello J. held:
“It is well established that an express authority need not be given to authorise an agent to sign a memorandum which is sufficient to satisfy the Statute … So the question arises whether [the agent] had authority, either express or implied, to sign the memorandum.”
The defendant’s solicitor accepted in evidence that he at all times acted on behalf of his client with the authority of and on the instructions of Mr. Elliott.
Moreover the evidence of Mr. O’Connor and of Mr. Elliott supported the existence of a concluded agreement as between them and in respect of all essential requirements of an agreement for the sale of the property at the time Mr. Parker wrote his letter of 5th June, 2007 and again at the time that he wrote the letter of 18th July, 2007.
9. The property
From 25th May, 2007, when the plaintiff’s solicitors wrote to the defendant’s solicitors setting out the details for the agreed transaction, it was clear that the property was referred to as 1A and 2 Usher’s Quay above ground level even though Mr. O’Connor was to retain ownership of the ground floor together with the use of the rest of the building pending redevelopment. In this regard a caretaker’s agreement was envisaged. The term was agreed in the letter from the defendant’s solicitors of 5th June. While there was discussion as to the mode of transfer of the plaintiff’s interest by way of (a) the sale of the property; (b) a building licence and easement; and (c) the lease of the property, this did not appear to be a matter of substance from the parties’ perspective.
Indeed, while the provision with regard to changes resulting from tax advice might be regarded as affecting the mode of transfer or by way of analogy as to the intent of the parties, the issue of a mode of transfer was not made an issue in the evidence of either the principals nor the solicitors on behalf of the principals.
It would follow from the evidence that the mode of transfer did not affect the agreement. No reference was made to the title of the plaintiff’s premises.
The Court has also considered that this would be a matter that one would expect to find in a Law Society contract for the sale of land it does not seem, in the circumstances of the case, to have been a matter that affected the enforceability of the contract, evidenced in writing, as between the principals and their respective solicitors.
The acknowledgment of the agreement in the letters of 5th June and 18th July were not “subject to contract”.
The provision with regard to the basement/subsoil is somewhat different. Originally an option was envisaged. Consideration of €100,000 was later agreed on 18th July, 2007. While there was no indication of the transaction in relation to this part of the property being transferred “as soon as possible” or “immediately the legal documentation is ready for execution” as envisaged in the oral agreement at the Merchant Café in February, 2007 and recorded, though not signed, immediately thereafter, the provision regarding the subsoil provided that consideration would be agreed and be negotiated with valuers. That much was agreed in the defendant’s solicitors’ letter of 5th June, 2008 and in their subsequent letter of 18th July, 2007 without, however, indicating any timing.
As already indicated, the timing and the provision that it was subject to development for commercial use, was not agreed. The plaintiff’s solicitors believed that the €100,000 would be paid on closing. By letter of 12th December, 2007 they stated that “our client is not willing to renegotiate this issue”. They conceded that, if the defendant did not wish to pay the additional sum of €100,000, then all reference to the basement and subsoil should be removed from the draft lease. In the view of the Court, this did not amount to an opening of negotiations notwithstanding the plaintiff’s unwillingness to renegotiate the issue.
10. Decision of the Court
The Court is satisfied that in respect of the premises including the basement and subsoil that there is evidence in writing of an agreement between the parties which accords with the requirements of the Statute of Frauds (Ireland) 1695. Subsequent correspondence did not affect that agreement.
The agreement forms an open contract subject to the Vendor and Purchaser Acts 1874.
The Court will amend the general endorsement of claim to include reference to the letter of 18th July, 2007.
Accordingly, the Court will order specific performance of the agreements evidenced in writing of 5th June, 2007, and 18th July, 2007, whereby the plaintiff agreed to grant an easement for the development, and subsequent sale, and the defendant agreed to develop and subsequently buy or arrange for the purchase, of the property known as 1A and 2 Usher’s Quay, Dublin 8.
Liberty Asset Management Ltd -v- Gannon
[2009] IEHC 468 (14 October 2009)
DEFENDANT
Judgment of Miss Justice Laffoy delivered on the 14th day of October, 2009
Background
At the commencement of 2006, the plaintiff and the defendant were neighbours, in the sense that the plaintiff carried on its business from the premises No. 54, Northumberland Road, Dublin, 4 (No. 54) and the defendant carried on his business from the adjoining premises, No. 52, Northumberland Road. The business of each of the parties was expanding, and each needed larger premises from which to carry on the business.
At the time, the plaintiff was actively seeking alternative premises and had made contact with a number of estate agents to see what was available. One of the agents contacted was Mr. Iain Finnegan of the firm of Finnegan Menton. Mr. Finnegan was a brother-in-law of Mr. Kevin O’Shaughnessy, who was a director of the plaintiff at the time. The defendant was also a client of Mr. Finnegan. It is common case that in the negotiations which ensued between the parties, Mr. Finnegan acted as agent for the defendant.
The defendant was the owner of an office development in Clonskeagh, known as 8, Richview Office Park, Clonskeagh, Dublin, 14 (8, Richview), which was unoccupied and which he was anxious to let. For some time, the defendant had been interested in acquiring No. 54, but his evidence was that it was the freehold interest he was interested in. His evidence was that he made a substantial offer at some time (the evidence is confusing as to precisely when) to the freehold owner for the freehold, but the offer was rejected.
The plaintiff is, and was, at the material time, a member of the Friends First group of companies. The evidence was that the plaintiff’s parent company stipulated that it was a condition of the plaintiff moving to larger accommodation that its leasehold interest in No. 54 be disposed of.
Against that background, a proposal emerged from the plaintiff to the defendant based on negotiations between Mr. O’Shaughnessy and his colleague, Mr. Gerard Mullen, who was the Finance Director of the plaintiff at the time, on behalf of the plaintiff, and Mr. Finnegan, on behalf of the defendant.
The proposal
By a letter dated 11th May, 2006, from Mr. O’Shaughnessy, on behalf of the plaintiff, to Mr. Finnegan, Mr. O’Shaughnessy made a proposal in relation to 8 Richview, which set out the main terms of a proposed lease to be taken by the plaintiff from the defendant: the area of the take and the rent per square foot; the number of car spaces involved and the rent per space; that the lease would be a new twenty-five year lease, with five yearly rent reviews, on a full repairing and insuring basis; that the tenant would have a break at year fifteen; that there would be a rent-free period of nine months; and that the defendant would underwrite one floor’s rent for a period of twenty-four months. There was an additional term which was put as follows:
“Understanding Gannons take over the lease of 54, Northumberland Road.”
Mr. Finnegan wrote to the defendant’s solicitors, Smith Foy & Partners, on 18th May, 2006, indicating that he had agreed to the terms proposed and that the property (meaning 8 Richview) had been measured and the floor area agreed. Mr. Finnegan also stated in the letter:
“Also, we have made contact with [the plaintiff’s] Landlord’s Agent to pursue the assignment of the Leasehold interest in No. 54 Northumberland Road and negotiate the acquisition of the building on behalf of Gerry Gannon.”
On 31st May, 2006, Smith Foy & Partners sent a draft lease, together with evidence of title and planning documentation in relation to 8 Richview to the plaintiff’s solicitors, O’Rourke Reid. There were some variations of the terms set out in Mr. Finnegan’s letter in relation to 8 Richview, the detail of which is not material, incorporated in the draft. In relation to No. 54, it was stated as follows:
“We have also been instructed that our client has agreed to take an Assignment (subject to Landlord’s consent) of your client’s existing lease at 54, Northumberland Road, Dublin, 4. Perhaps you would let us have the usual Contracts for Sale in respect of this aspect of the transaction.”
That letter was not expressed to be “subject to contract”. Of particular significance, in my view, is how the defendant’s solicitors then perceived the position in relation to No. 54 to be – as an aspect of the transaction. As I will outline later, that perception is in accordance with the evidence, in that the understanding of the principals at all times from 11th May, 2006, until the lease of 8 Richview was taken by the plaintiff some fourteen months later, was that it was a condition of the plaintiff taking the lease that the defendant would take over the plaintiff’s existing interest in No. 54.
The response from O’Rourke Reid, which was dated 9th June, 2006, was headed “Subject to Lease & Agreement/Lease & Agreement Denied”. In that letter, O’Rourke Reid stated that they would submit their “pre-lease inquiries” within a few days, but they made some comments on the content of the lease, the detail of which is not material. In relation to No. 54 they stated as follows:
“We note that your client is to take an assignment of our client’s existing lease on 54, Northumberland Road, and we are arranging for the title documents to be taken up in that regard. We would therefore expect to have contracts for sale to you next week.”
O’Rourke Reid concluded the letter as follows:
“… please note that we have no authority to bind our client to any lease, either oral or in writing, until such time as lease documentation has been executed by the parties, exchanged, and all rent payable thereunder paid and cashed.”
Smith Foy and Partners replied on 14th June, 2006, and this time, their letter was headed “Subject to Lease/Lease Denied”. They dealt with, or sought clarification on, the matters which had been raised in relation to 8 Richview. In relation to No. 54, they sought further details without delay and also confirmation that the plaintiff would be vacating No. 54.
It is unquestionably the case that at that point, there was no agreement between the plaintiff and the defendant as to the terms of the lease of 8 Richview, and, accordingly, no conclusive agreement in relation to the overall transaction. The commencement date of the term had not even been agreed. Over the next thirteen months, there was a constant flow of correspondence between O’Rourke Reid and Smith Foy & Partners, dealing with the terms of the lease of 8 Richview, which were eventually finally agreed on 6th July, 2007. The aspect of transaction which related to 8 Richview was effectively completed on 6th July, 2007, although the correspondence between the solicitors in relation to it continued for another three months because of a change in the name of the guarantor and a problem in relation to the guarantor’s seal. The lease of 8 Richview bears the date 6th July, 2007, and it is made by the defendant in favour of Liberty Mortgage Corporation Limited and the guarantor is Friends First Life Assurance Company Limited. The plaintiff has been in occupation of 8 Richview under the terms of the lease since 6th July, 2007.
The focus from here on will be on what transpired between the plaintiff’s solicitors and the defendant’s solicitors in relation to the aspect of the transaction relating to No. 54, having first considered the plaintiff’s title to No. 54.
The plaintiff’s title to No. 54
The plaintiff’s title to No. 54 was derived from a lease dated 12th June, 2003 (the 2003 lease), made between Evelyn Margaret Fasenfeld, as landlord, the plaintiff, as tenant, and Friends First Holdings Limited, as guarantor. It created a demise of No. 54 for the term of nine years and eleven months from 11th June, 2003. It reserved an initial yearly rent of €120,000, the rent to be subject to review from the first day of the sixth year of the term.
The 2003 lease contained a clause which, although not alluded to in any of the correspondence that passed between the solicitors, assumed considerable significance during the hearing. The clause in question, clause 7.8, was what is commonly called a “break” clause, in that it enabled the tenant to terminate the 2003 lease during its term. It provided that the tenant might terminate as of the expiration of the fifth year of the term, subject to the tenant serving on the landlord a notice in writing exercising the right to terminate at least twelve months prior to that date. It was provided that, in relation to the notice, time would be of the essence. The position, accordingly, was that, in order to exercise the break provision, the plaintiff was required to serve notice exercising the right, on 10th June, 2007, at the latest. A feature of clause 7.8, which also assumed considerable significance at the hearing was paragraph (e) thereof, which provided that, in the event of the plaintiff assigning the 2003 lease with the landlord’s consent to a third party, the provisions of clause 7.8 should not apply to the third party or any subsequent successors entitled thereto. In other words, the break clause was personal to the plaintiff.
A further feature of the plaintiff’s leasehold title to No. 54, which assumed some significance during the hearing, was the fact that the plaintiff had executed a Deed of Renunciation dated 9th June, 2003. As I understand the evidence, it constituted a waiver by the plaintiff of its statutory right to renew the 2003 lease on its expiry. This feature of the plaintiff’s leasehold title was first raised in the re-examination of the defendant on the second day of the hearing. Up to that point in time, counsel for the defendant was unaware of it.
I now return to considering what transpired between the parties’ solicitors in relation to No. 54.
Dealings between the solicitors in relation to No. 54
The plaintiff’s solicitors had to obtain the title documents to No. 54 from the plaintiff’s former solicitors. When this was done, on 30th June, 2006, O’Rourke Reid furnished to Smith Foy & Partners what was described as a draft contract for sale in duplicate and a copy of the 2003 lease, in relation to “the related” lease assignment of No. 54. O’Rourke Reid stated that they were then liaising with the landlord to obtain the requisite consent to the assignment. On the same day, they wrote to the solicitors for the landlord, Mrs. Fasenfeld, namely, Arthur Cox, requesting a licence to assign. On 5th July, 2006, O’Rourke Reid furnished evidence of the title of Mrs. Fasenfeld to make the 2003 lease and also a copy of the Deed of Renunciation to Smith Foy & Partners. Both letters from O’Rourke Reid were headed “Subject to Lease & Agreement/Lease & Agreement/Denied”. In the latter, it was stated that O’Rourke Reid looked forward to receiving the contracts for sale in duplicate, duly executed by the defendant, which they assumed would coincide with final agreement being reached between the parties in relation to the proposed lease of 8 Richview by the defendant to the plaintiff. The latter letter also contained a statement that O’Rourke Reid had no authority to bind the plaintiff in terms similar to that quoted earlier, with the substitution of “deposit” for “all rent payable thereunder”.
Title and planning matters in relation to No. 54 had been raised in a letter dated 6th July, 2006, which was headed “Subject to Contract/Contract Denied”, which obviously crossed the letter of 5th July, 2006, in transmission, in which Smith Foy & Partners had sought additional title and planning documentation including a coloured version of the map on the 2003 lease. This was furnished by O’Rourke Reid with a letter of 18th July, 2006, in which it was reiterated that the plaintiff would not be in a position to complete the assignment of No. 54 until such time as 8 Richview was available for occupation. It was suggested that the contracts for sale might be amended accordingly. By a letter of the same date, relating to 8 Richview, O’Rourke Reid conveyed the same message – that the plaintiff would not be moving out of No. 54 until it was ready to move into 8 Richview, and that the completion of No. 54 would be delayed accordingly. A similar message was conveyed in a letter of 25th July, 2006, from O’Rourke Reid in which it was stated that the defendant would be required to execute contracts for sale in relation to No. 54, “once final terms of the lease of 8 Richview had been agreed”. A letter dated 28th July, 2006, from Arthur Cox to O’Rourke Reid sought details of the defendant’s address, together with “bank and character reference and some information in relation to” him. By letter dated 3rd August, 2006, to Smith Foy and Partners, O’Rourke Reid sought that information.
The next communication from Smith Foy & Partners in relation to No. 54 was a letter dated 7th September, 2006, which was again headed “Subject to Contract/Contract Denied”, which returned the contracts for sale executed by the defendant. Requisitions on title were also furnished. It was suggested that the parties agree a closing date for the assignment of No. 54, and it was pointed out that the contract had been amended in that regard. By letter dated 13th September, 2006, which, again, was headed “Subject to Contract/Contract Denied”, from O’Rourke Reid to Smith Foy & Partners, it was stated that the plaintiff wished to hold off executing the contracts for sale until such time as the final version of the lease was agreed in relation to 8 Richview. The request for the information sought by Arthur Cox was repeated. In response to the repeated request, by letter of 18th September, 2006, Smith Foy & Partners informed O’Rourke Reid that they had been in contact with the solicitor in Arthur Cox who was dealing with the matter, and had advised him as to the identity of the defendant. Smith Foy & Partners had been told that, in the circumstances, the information which had been sought in relation to the defendant was not required.
In an e-mail of 6th October, 2006, O’Rourke Reid raised certain issues in relation to the 8 Richview aspect of the transaction and stated that, on final confirmation of the issues, the plaintiff would be in a position to execute the lease of 8 Richview immediately. The e-mail continued:
“Execution of the lease will be dependent on the assignment of the existing leasehold interest at no. 54 Northumberland Road to your client – I note that your client has executed Contracts in this regard. I will follow up with [Arthur Cox] as I have not yet received the draft licence to assign – I note that they are satisfied with your client from a financial and reference point of view.”
By a further letter of 9th October, 2006, O’Rourke Reid furnished the draft Licence to assign, which Arthur Cox had furnished to them, to Smith Foy & Partners for approval. The only comment that elicited from Smith Foy & Partners was that there was an error in one paragraph in the draft Licence, as was pointed out in their letter of 12th October, 2006. That was the last item of correspondence between the solicitors in relation to No. 54 prior to the final agreement on the terms of the lease of 8 Richview on 6th July, 2007. However, in the interim, there was a very considerable body of correspondence relating to the terms of that lease and the aspect of the transaction which related to 8 Richview.
The contracts in relation to No. 54
It is necessary now to consider the draft contracts as furnished by O’Rourke Reid and as returned executed by the defendant by Smith Foy & Partners. The contracts were in the standard form ‘General Conditions of Sale (2001 Revised Edition)’ published by the Law Society. On the evidence, I am satisfied that when they were dispatched by O’Rourke Reid to Smith Foy & Partners, the date was blank, other than that it indicated the year 2006. The purchase price was also left blank. The closing date referred to the special conditions.
The only provisions in the special conditions which are of significance are special condition 4, which made the transaction subject to the plaintiff obtaining the consent of the landlord to the assignment, and special condition 5, which dealt with the closing date. As drafted by O’Rourke Reid, special condition 5 read:
“The closing date for this sale is to coincide with the grant of a Lease of premises at Block 8 Richview Office Park, Clonskeagh, Dublin, 14 to be granted by the purchaser to the vendor.”
That special condition was amended by Smith Foy & Partners to read:
“The closing date for this sale shall be the …. day of ….. 2006 or 14 days after the vendors obtain the consent of the landlord to the assignment of the Lease whichever is the later.”
Smith Foy & Partners made some other amendments to the contracts. In the Memorandum of Agreement, the date of the contract was inserted as 6th September, 2006. The purchase price was inserted as €1, as was the balance of the purchase money. The contracts were executed by the defendant and his signature was witnessed by James Foy of Smith Foy and Partners.
The contracts were never executed by the plaintiff. They were retained by O’Rourke Reid while the correspondence continued between the two firms of solicitors in relation to 8 Richview.
Dealings in relation to No. 54 post 6th July, 2007
After 6th July, 2007, correspondence continued between O’Rourke Reid and Smith Foy & Partners in relation to 8 Richview, which was being still headed by both sides “Subject to Lease/Lease Denied”, although the terms of the lease had been finalised and the plaintiff was in possession of 8 Richview. As I have recorded, there wa, at that time, and there continued to be for some time, an issue about the identity of the guarantor and the proper execution of the lease of 8 Richview by the guarantor. It would appear from the correspondence put in evidence, that the plaintiff’s solicitors did not furnish final documentation properly executed until some time towards the end of December 2007. The annoyance of the defendant and his solicitors about that delay is wholly understandable.
However, the delay in furnishing the final properly executed leases in relation to 8 Richview had nothing to do with what happened in relation to No. 54 after 6th July, 2007. What happened was that “out of the blue” Smith Foy & Partners sent a letter dated 21st August, 2007, to O’Rourke Reid stating that the defendant was thereby terminating “all negotiations regarding the proposed acquisition of the leasehold interest” in No. 54. The documentation in relation to No. 54 which had been furnished to Smith Foy & Partners was returned. There was no response to that letter by O’Rourke Reid until 23rd October, 2007. The position adopted on behalf of the plaintiff in that letter was that the arrangement between the plaintiff and the defendant involved two deals: one being the taking by the plaintiff of the lease of 8 Richview, and the other being the defendant’s agreed acquisition of No. 54. It was stated that if the defendant did not honour his obligations regarding No. 54, the matter would be taken further. At that stage, O’Rourke Reid renewed correspondence with Arthur Cox, seeking the final version of the licence to assign. By letter dated 14th December, 2007, Arthur Cox confirmed, on behalf of Mrs. Fasenfeld, that, “subject to completion of a Licence to Assign by all parties in substantially the form previously sent”, she consented to the assignment by the plaintiff to the defendant. By letter dated 17th December, 2007, O’Rourke Reid furnished a copy of the letter from Arthur Cox to Smith Foy & Partners, and referred to special condition 5 in the contract and called on the defendant to complete the transaction within fourteen days. The response of Smith Foy & Partners was terse: the defendant did not accept that there was, or ever was, a contract.
On 11th January, 2008, O’Rourke Reid, on behalf of the plaintiff, served a notice to complete in accordance with clause 40 of the ‘General Conditions of Sale’ in what was described as a contract dated 6th September, 2006, made between the plaintiff and the defendant. The response from Smith Foy & Partners reiterated their position and stated that the issue of a completion notice did not arise. There was subsequent correspondence in the same vein.
Eventually, these proceedings were initiated by the issuing of a plenary summons on 7th May, 2008.
I think it is appropriate, at this juncture, to consider the oral evidence and to make the necessary findings of fact.
Findings of fact
The correspondence between the solicitors records of what transpired between the parties in relation to No. 54 between 31st May, 2006, when Smith Foy & Partners first wrote to O’Rourke Reid, and 6th July, 2007, when the taking of the lease of 8 Richview was effectively completed. The aspects of the dealings of the parties in relation to which one has to principally resort to the oral evidence is what transpired before 31st May, 2006, and after 6th July, 2007, and, in particular, why Smith Foy & Partners wrote the letter of 21st August, 2007, in which, effectively, the defendant purported to pull out of the acquisition of No. 54.
The defendant’s understanding of the position of the parties before the involvement of their respective solicitors emerged in cross-examination. When asked what deal had been done in relation to No. 54 and in relation to 8 Richview, the defendant’s answer was that the plaintiff was to take a 25-year lease from him, with 5- yearly rent reviews, and he was then to take the building (meaning No. 54) off the plaintiff, but he added the qualification that taking the lease of No. 54 from the plaintiff was “subject to the break clause”. He stated that he signed the lease (meaning, I think, the contract dated 6th September, 2006), so that, obviously, he was taking it (meaning, I understand, No. 54). He confirmed that that was “the package” and he confirmed that it was never the case in the negotiations that he would lease 8 Richview but not get No. 54. He specifically stated that if the plaintiff carried out its part of the agreement (meaning, I understand, the exercise of the break option), he would have obviously gone ahead with the deal. When the terms of the letter of 31st May, 2006, were put to the defendant and when it was put to him that those terms represented the agreement which had been made, his response was: “In principle, yes” (Transcript, Day 2, p.72).
Although, aside from his asserted grievance about the failure to exercise the break option, two other sources of annoyance to the defendant in his dealings with the plaintiff emerged in his evidence, one being his assertion that the plaintiff moved into 8 Richview without his permission, and the other being his assertion that No. 54 was left vacant and there was no maintenance being kept on it after 6th July, 2006, the main reason he advanced for pulling out of the acquisition of No. 54 was that he had ascertained that the plaintiff had not exercised the break in the lease.
The defendant’s evidence was that, in his original negotiations with Mr. O’Shaughnessy, Mr. O’Shaughnessy told him that there was a break clause in the lease of No. 54. At that stage, he did not know the duration of the term of the lease. The defendant’s evidence was that his interest in the break option being exercised was that he believed that in a situation where it had been exercised, he would have had greater leverage in negotiating the acquisition of the freehold from Mrs. Fasenfeld. He described the exercise of the break option as always his “first priority”. Yet, amazingly, he acknowledged that he did not instruct his agent, Mr. Finnegan, or his solicitor, James Foy of Smith Foy & Partners, to ensure that the plaintiff was contractually bound to exercise the break option. Equally amazingly, he testified to his belief that the plaintiff was not under “any illusion” that the break option had to be exercised, although he acknowledged that Mr. Foy probably did not know that the defendant wanted the break option exercised, suggesting that Mr. Finnegan probably knew more about it than Mr. Foy.
Mr. Finnegan’s evidence was that he and Mr. O’Shaughnessy had agreed the “bones of a deal” before the solicitors became involved. In relation to the break clause in the lease of No. 54, his evidence as to what was discussed with Mr. O’Shaughnessy and Mr. Mullen was vague and imprecise. Nonetheless, he testified that it was “the elephant in the room”, in that everybody knew it was there and everyone knew it had to be used. However, he candidly admitted that he could not recollect knowing specifically that it was exclusive to the plaintiff. He acknowledged that it was probably his fault that Mr. Foy had not been told of the significance of exercising the break option. When specifically questioned in cross-examination as to why, if the exercise of the break option was fundamental to the whole arrangement, he had not instructed Mr. Foy of this in his letter of 18th May, 2006, his response was that he did not realise that it would have to be put into the contract. Mr. Finnegan could not recall any specific request from the defendant prior to July 2007, to the plaintiff’s representatives to exercise the break option, nor could he recall asking them to do so himself.
Mr. Foy’s evidence was clear and precise on whether he had received instructions from his client, the defendant, or the defendant’s agent, Mr. Finnegan, as to the significance of the exercise of the break option. He furnished the contracts which were subsequently dated 6th September, 2006, to the defendant, together with a letter in which he advised the defendant, inter alia, of the existence of the break clause in the 2003 lease, and of the fact that it was personal to the plaintiff. He also raised in that letter the issue whether the defendant was prepared to go ahead with the acquisition of No. 54, regardless of whether or not the plaintiff went ahead with the lease of 8 Richview. He received no reply to that letter; the defendant simply signed the contracts and returned them to him. Mr. Foy was never given any instructions about the exercise of the break option.
Turning to the period after 6th July, 2007, on the evidence, I am satisfied that it was Mr. Foy on the defendant’s side who first raised the issue of No. 54 after the lease of 8 Richview was put in place and the plaintiff had gone into possession of those premises. Mr. Foy’s evidence was that he rang a member of the defendant’s staff, with whom he had been dealing in relation to the transaction, to ascertain what was happening to No. 54. It would seem that it was that telephone call which triggered an inquiry from the defendant to Mr. Finnegan in relation to whether the break option had been exercised, which, in turn, led to a telephone call from Mr. Finnegan to Mr. Mullen. Mr. Mullen’s version and Mr. Finnegan’s version of the telephone conversation do not quite tally. However, what is clear is that both sides were aware that the break option had not been exercised and that the time for so doing had expired. Subsequently, Mr. Foy received instructions to inform the plaintiff’s solicitors that the defendant was not going ahead with the acquisition of No. 54. That led to his letter of 21st August, 2007.
The aspects of the evidence which I have highlighted are pertinent to the findings of fact which I consider to be crucial to the determination of the issues in the case. The findings which follow are based not only on that oral evidence, but on the totality of the evidence, including the correspondence which passed between the solicitors.
First, I am satisfied that prior to 31st May, 2006, there was agreement in principle between the plaintiff and the defendant that the plaintiff would take, and that the defendant would grant, a lease of 8 Richview and that, additionally, in consideration of the plaintiff taking the lease, the defendant would take over the plaintiff’s existing leasehold interest in No. 54. Various terminology was used by counsel and by the witnesses to describe what took place between the parties before 31st May, 2006: “headings” of agreement; “headlines” of agreement; “bones of agreement”; and “agreement to agree”. However, in my view, the terminology used by the defendant, agreement in principle, best describes the relationship between the parties. As regards the lease of 8 Richview, which was going to be a complex document, at that time, some of the essential terms were agreed but the detail remained to be agreed. There was mutuality between the parties as regards the aspect of the agreement in principle which is at the core of these proceedings, in that it was expressly agreed that the defendant’s obligation to take over the plaintiff’s existing leasehold interest in No. 54 was contingent on the plaintiff taking the lease of 8 Richview on agreed terms, and that the plaintiff’s obligation to take the lease of 8 Richview was contingent upon the defendant fulfilling his obligation to take over the plaintiff’s existing leasehold interest in No. 54, which the defendant acknowledged in his evidence. Further, subject to the plaintiff taking the lease of 8 Richview, each contracting party committed to what was necessary to give effect to what was agreed in principle in relation to No. 54 – that the plaintiff would assign its existing leasehold interest and give vacant possession to the defendant and that the defendant would take an assignment of the leasehold interest.
Secondly, the nature of the plaintiff’s existing interest in No. 54, which was the leasehold interest created by the 2003 lease, was known to, and accepted by, the defendant long before the terms of the lease of 8 Richview would be finally agreed. This occurred before 6th September, 2006, when the contracts which had been furnished by O’Rourke Reid in relation to No. 54 were executed by the defendant and returned next day to O’Rourke Reid. In particular, it is clear that the defendant was on notice of the following matters:
(a) the existence of the break clause in the lease and the fact that it was personal to the plaintiff; and
(b) the existence of the Deed of Renunciation.
Thirdly, the agreement in principle as regards the defendant’s obligation to take over the plaintiff’s interest in No. 54 was not subject to a term or condition that the plaintiff would exercise the break option in accordance with the terms of the 2003 lease. While the existence of the break clause was ascertained during the initial discussions between the defendant and Mr. Finnegan, on the one hand, and Mr. O’Shaughnessy, on the other hand, I do not think that the exercise of the break option had the significance for the defendant at that time which he subsequently ascribed to it. The true position seems to be that the defendant was anxious to procure the plaintiff as a tenant of 8 Richview on terms that were suitable to him, and it was made clear to him that to achieve that objective he was going to have to take over the plaintiff’s existing interest in No. 54. Even if it had been proposed to the plaintiff’s representatives that the plaintiff should exercise the break option, it is difficult to see how the plaintiff could have acceded to that proposal prior to the terms of the lease of 8 Richview being finally agreed, because the plaintiff would be giving up No. 54 while not having any guarantee that it would be in a position to move to 8 Richview. In any event, I am satisfied that there was no such proposal put to the plaintiff and there was no commitment from the plaintiff to exercise the break option.
Fourthly, the terms and conditions of the lease of 8 Richview were the subject of further negotiation between the parties and, indeed, of variation over a protracted period of approximately thirteen months. However, the terms were eventually agreed and the lease was put in place on 6th July, 2006. During that period, the formalities in relation to the assignment of No. 54 to the defendant were on hold. It was expressly stated in the letter of 6th October, 2006, from O’Rourke Reid to Smith Foy & Partners, that the execution of the lease of 8 Richview would be dependent on the assignment of the leasehold interest in No. 54 to the defendant. Smith Foy & Partners did not, at any time, demur from that position. In explaining why he varied the special condition in relation to the closing date, Mr. Foy explained that he was not clear at the time that the transactions in relation to 8 Richview and No. 54 were “intrinsically linked”. There is no doubt but that they were intrinsically linked from the time the proposal was first put on behalf of the plaintiff in the letter of 11th May, 2006. The letter of 6th October, 2006, made it clear that they were. That was the basis on which the parties continued their detailed and protracted negotiation of the terms of the lease of 8 Richview, which ultimately resulted in a concluded agreement.
Fifthly, the plaintiff fulfilled its part of the bargain that was agreed in principle when it took the lease of 8 Richview on 6th July, 2007, and subsequently indicated its readiness to assign No. 54 to the defendant. The defendant partially fulfilled his part of the bargain in granting the lease. However, after 6th July, 2007, he remained obligated to take the assignment of the plaintiff’s interest in No. 54. I say that because, when all of the terms of the lease of 8 Richview were agreed so that the lease could be, and was, put in place, the agreement in principle crystallised into a completed contractual arrangement which included a contractual obligation on the part of the defendant to take No. 54.
Sixthly, although it has to be recognised that the plaintiff’s solicitors were very remiss in June and July 2007 in not addressing the outstanding title issues in relation to the transfer of the leasehold interest created by the 2003 lease in No. 54 to the defendant, namely, replying to the requisitions on title which had been furnished to them in September 2006, and finalising obtaining the landlord’s formal consent to assignment, and in not ensuring that the completion of the assignment of No. 54 to the defendant was effected simultaneously with the completion of the lease of 8 Richview, in my view, nothing occurred at that time which released the defendant from his contractual obligation to take the leasehold interest created by the 2003 lease in No. 54. When testifying, the defendant took umbrage at the suggestion that he did not carry out the deal, asserting that he carries out any deal he does. The fact is that, in instructing his solicitors to write the letter of 21st August, 2007, purporting to withdraw from the acquisition of No. 54, the defendant reneged on part of his agreement in principle with the plaintiff, which had become a concluded agreement on 6th July, 2007.
Finally, no explanation was offered as to why it took two months for the plaintiff’s solicitors to respond to the letter of 21st August, 2007. Moreover, I consider that the analysis of the arrangement between the parties in the ultimate response, the letter of 23rd October, 2007, from O’Rourke Reid, which suggested that it had involved “two deals” was incorrect. In any event, I am satisfied that the defendant’s contractual liability to take No. 54 remained in existence, but completion of that aspect of the transaction was conditional upon the plaintiff procuring, in accordance with the terms agreed and contained in the contract dated 6th September, 2006, signed by the defendant, the consent of the landlord, Mrs. Fasenfeld. The letter of 14th December, 2007, from Arthur Cox, which was furnished to Smith Foy & Partners on 17th December, 2007, brought matters to a point at which, for practical purposes, the condition was fulfilled, because there was no basis thereafter for fearing that Mrs. Fasenfeld’s consent would not be forthcoming.
The case as pleaded
In its statement of claim delivered on 22nd May, 2008, the plaintiff pleaded that, by an agreement made in or about May 2006 between the parties, in consideration of the defendant agreeing to purchase by way of assignment the plaintiff’s leasehold interest in No. 54, the plaintiff agreed to enter into a lease of the defendant’s premises, 8 Richview. That plea, it seems to me, distorts somewhat the reality of the situation, in that it is absolutely clear on the evidence that the crucial aspect of the transaction was the plaintiff taking the lease of 8 Richview and the defendant’s agreement to take No. 54, was contingent on that lease being put in place. In replies dated 16th October, 2008, to particulars sought on behalf of the defendant, the plaintiff identified the agreement as being based on discussions which took place between the parties and their agents on various dates in May 2006, resulting in agreement, which Smith Foy & Partners “acknowledged” by the letter dated 31st May, 2006, and was “further reduced to writing” in the contract for sale dated 6th September, 2006.
In the statement of claim, it was further pleaded that pursuant to the agreement previously pleaded, the defendant executed the contract dated 6th September, 2006. It was then pleaded that, “in further pursuance of the said agreement”, the plaintiff had entered into the lease of 8 Richview. The nub of the plaintiff’s case, as pleaded, is that, while it was ready, willing and able to complete the assignment of the leasehold interest in No. 54 to the defendant at all material times, the defendant failed, refused or neglected to complete the acquisition despite the service of notice to complete on 11th January, 2008.
The reliefs sought by the plaintiff are, first, specific performance of the agreement in writing dated 6th September, 2006, “whereby the defendant agreed to purchase the Plaintiff’s title and interest in the premises at” No. 54 and, secondly, damages for the losses and expenses incurred by the plaintiff by reason of the failure of the defendant to honour “the terms of the said Agreement”.
The defendant’s defence was delivered on 21st July, 2008. In it, the defendant denies the existence of the alleged agreement, or any agreement. Further, the defendant pleads that if there was such agreement, it was not enforceable because there was no completed memorandum for the purposes of the Statute of Frauds. Additionally, the defendant specifically denies that the agreement of 6th September, 2006, was a binding agreement and denies that the plaintiff entered into the lease of 8 Richview in pursuance of the alleged agreement. Everything else pleaded in the statement of claim is traversed. Finally, as the relief sought by the plaintiff is equitable, the defendant pleads that the plaintiff is disentitled to such relief by virtue of unreasonable and unconscionable delay amounting to laches.
In its reply, delivered on 23rd March, 2009, in addition to joining issue with the pleas in the defendant’s defence, the plaintiff pleaded that defendant is estopped by virtue of its conduct and actions from denying the existence of an enforceable contract.
Issues raised in relation to the pleadings
Counsel for the plaintiff submitted that there is no mention whatsoever in the defence to the defendant’s contention that the acquisition of No. 54 by the defendant was conditional on the break option in the 2003 lease being exercised. The submission of counsel for the plaintiff that the issue of the break clause was an “afterthought” on the part of the defendant for the purposes of justifying his reneging on the aspect of the deal in relation to No. 54, is, in my view, correct. The pleading point merely confirms what I have found on the evidence and is of no further relevance.
Of more relevance are two further issues raised on the pleadings which I mention now for completeness and will address later.
First, counsel for the defendant emphasised that what the plaintiff is seeking is specific performance of an agreement dated 6th September, 2006, and that the claim for damages is linked to that agreement. It was submitted by counsel for the defendant that this is not an action for specific performance of an agreement alleged to exist and alleged to be evidenced by the letter dated 31st May, 2006. For what it is worth, I do not agree with that interpretation of the pleadings because the statement of claim read in conjunction with the particulars given on 16th October, 2008, clearly point to a pre-31st May, 2006, agreement, as acknowledged by the letter of that date.
Secondly, although in the plaintiff’s written submissions it was argued that even if there is not a sufficient note or memorandum for the purposes of the Statue of Frauds of the agreement of which the plaintiff is seeking specific performance, by virtue of its part-performance of its contractual obligation by taking the lease of 8 Richview, the plaintiff is entitled to the reliefs it seeks. Reliance on the equitable doctrine of part-performance was not pleaded by the plaintiff in its pleadings.
The issues
The issues which remain to be determined on the pleadings and on the facts proven, in my view, are the following:
(1) Was there a concluded agreement under which the defendant agreed to acquire the plaintiff’s interest in No. 54?
(2) If there was a concluded agreement, is there in being a sufficient note or memorandum for the purposes of the Statute of Frauds (Ireland) 1695, to render it enforceable?
(3) If there is a concluded agreement, but there is not a sufficient note or memorandum for the purposes of the Statute of Frauds, is the plaintiff entitled to the equitable relief sought on the basis that the agreement has been part performed?
(4) Is the plaintiff disentitled to claim equitable relief on the grounds of unreasonable and unconscionable delay amounting to laches?
(5) Is the doctrine of estoppel of any relevance in assessing whether the plaintiff is entitled to the relief claimed?
Submissions
The Court has had the benefit of comprehensive written submissions from counsel for the plaintiff and counsel for the defendant and has also had the benefit of oral submissions. I do not consider it necessary to outline the submissions in this judgment and I will refer thereto only to the extent necessary when dealing with the issues I have identified.
Concluded agreement?
As I have found on the evidence, the parties had reached agreement in principle prior to 31st May, 2006 that the defendant would grant, and the plaintiff would take, a lease of 8 Richview and that, as part of the consideration for the plaintiff taking the lease, the defendant would take over the plaintiff’s existing interest in No. 54. There was no concluded agreement at that stage because it is quite clear from the evidence and from the correspondence that the terms and conditions of the lease of 8 Richview were not finalised until 6th July, 2007. At that stage, the lease on the agreed terms was entered into by the parties. I consider that, at that point, there came into being a concluded agreement, under which, in addition to granting the lease of 8 Richview, the defendant was contractually bound to take the plaintiff’s interest in No. 54. The obligation under that concluded agreement which has not been fulfilled is the defendant’s obligation to take the plaintiff’s existing leasehold interest in No. 54.
In the same way as the terms and conditions of the lease of 8 Richview were the subject of negotiation and variation prior to being finally agreed, during the period between the agreement in principle having been reached in May 2006 and the concluded agreement coming into being in July 2007, the title requirements and the practicalities of completion of the aspect of the agreement in principle in relation to No. 54 were agreed between the solicitors, subject, however, to a concluded agreement coming into existence in due course. This is evidenced, inter alia, by the contracts which bear the date of 6th September, 2006, and which were signed by the defendant. It is also clear, on the correspondence which passed between the solicitors subsequently in September and October 2006, from which it is clear that as regards No. 54, all title issues had been agreed, the only issue of any significance being the purchaser’s obligation to obtain the licence of Mrs. Fasenfeld to the assignment to the defendant, which the plaintiff agreed to furnish.
I am of the view that the pleading of its case by the plaintiff in this matter is sufficient to allow the plaintiff to seek the relief which it claims. In essence, what it is seeking is an order for specific performance of an agreement by the defendant to acquire the plaintiff’s title and interest in No. 54. That, in reality, is a claim for specific performance of the “aspect of the transaction”, to use the terminology used in the first letter from Smith Foy & Partners dated 31st March, 2006, agreed in principle, under which the defendant agreed to take the plaintiff’s leasehold interest in No. 54, provided that the terms of the lease of 8 Richview were agreed and the lease was put in place. When the lease of 8 Richview was in fact put in place, the defendant became contractually bound to acquire the plaintiff’s leasehold interest in No. 54, as he had agreed in principle to do. It is of this contractual obligation that the plaintiff seeks specific performance. In my view, the fact that, in the prayer in the statement of claim, the agreement is represented as having been dated 6th September, 2006, does not preclude the plaintiff from pursuing the relief the essence of which is there in the prayer.
Sufficient note or memorandum?
Insofar as is relevant for present purposes, s. 2 of the Statute of Frauds (Ireland) 1695, provides as follows:
“No action shall be brought whereby to charge … any person … upon any contract of sale of lands, tenements or hereditaments, or any interest in or concerning them … unless the agreement upon which such action shall be brought, or some note or memorandum thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorised.”
In Boyle v. Lee [1992] 1 I.R. 555, the Supreme Court, after a period of uncertainty, with a view to the avoidance of doubt and the avoidance of litigation, sought to bring certainty to the question of what is or is not a sufficient note or memorandum for the purposes of the Statute of Frauds. With that objective, Finlay C.J. stated as follows (at p. 574):
“In my view, the very definite statement that a note or memorandum of a contract made orally is not sufficient to satisfy the Statue of Frauds unless it directly, or by very necessary implication recognises not only the terms to be enforced, but also the existence of a concluded contract between the parties, and the corresponding principle that no such note or memorandum which contains any term or expression such as ‘subject to contract’ can be sufficient, even if it can be established by oral evidence that such a term or expression did not form part of the originally orally concluded agreement, achieves that certainty. The existence of such a rule or provision would not, in my view, allow for the ‘exceptional cases’ mentioned by Keane J. in the decision in Mulhall v. Haren [1981] I.R. 364.”
In this case, the party whom it is sought to charge with contractual liability is the defendant. Accordingly, the pertinent question which arises from the application of the Statute of Frauds to determining whether there is a contract by the defendant to acquire the plaintiff’s interest in No. 54 which can be enforced by action against the defendant is whether there is in existence an agreement in writing or, alternatively, a memorandum or note of a concluded agreement signed by the defendant or his agent. Applying the principle stated by Finlay C. J. in Boyle v. Lee, the question which arises is whether there is a document signed by the defendant or his agent which recognises the existence of a concluded agreement between the parties which includes the term which the plaintiff seeks to enforce, namely, that the defendant agreed to take an assignment of No. 54. A document which was headed with, or contains, the expression “subject to contract” or a like expression cannot suffice for that purpose.
In their submissions, counsel for the plaintiff sought to rely on either the letter of 31st May, 2006 from Smith Foy & Partners, as agents for the defendant, or, alternatively, the contract which bears the date 6th September, 2006, which was signed by the defendant. Neither document is sufficient, because, on the finding I have made, there was no concluded agreement in existence at the time either document came into being. There was no concluded agreement between the parties until 6th July, 2007.
While the letter of 31st May, 2006, was not headed or expressed to be “subject to contract”, and recognised that the defendant had agreed to take an assignment of the plaintiff’s existing leasehold interest in No. 54, on the evidence, as I have found, that was not a stand alone transaction, but rather, was merely an aspect of the defendant’s contractual liability in return for the plaintiff taking the lease of 8 Richview, if its terms were to be agreed and the lease was to be granted.
As regards the signed contract which is dated 6th September, 2006, the letter dated 7th September, 2006, was headed “Subject to Contract/Contract Denied”. The response from the plaintiff’s solicitors of 13th September, 2006, which was also headed “Subject to Contract/Contract Denied”, made it absolutely clear what the then current status of the dealings between the parties was in stating that the contract would not be executed by the plaintiff until such time as the final version of the lease in relation to 8 Richview had been agreed.
Following the coming into existence of a concluded agreement on 6th July, 2007, no document signed by the defendant, or by an agent of the defendant, came into existence which would fulfil the requirements set out by Finlay C.J. in Boyle v. Lee.
Accordingly, in my view, there exists no note or memorandum of the concluded agreement to satisfy the Statute of Frauds and, accordingly, the concluded agreement is unenforceable unless the plaintiff can rely on the equitable doctrine of part performance or some other equitable principle.
Part Performance
The rationale of the equitable doctrine of part performance was explained by Simon L.J. in Steadman v. Steadman [1976] A.C. 536, in the following passage (at p. 558), which was cited with approval by the Supreme Court in Mackie v. Wilde (No. 2) [1998] 2 I.R. 578:
“…almost from the moment of passing of the Statute of Frauds, it was appreciated that it was being used for a variant of unconscionable dealing, which the statute itself was designed to remedy. A party to an oral contract for the disposition of an interest in land could, despite performance of the reciprocal terms by the other party, by virtue of the statute disclaim liability for his own performance on the ground that the contract had not been in writing. Common law was helpless. But equity, with its purpose of vindicating good faith and with its remedies of injunction and specific performance, could deal with the situation. The Statute of Frauds did not make such contracts void, but merely unenforceable, and, if the statute was to be relied on as a defence, it had to be specifically pleaded. Where, therefore, a party to a contract unenforceable under the Statute of Frauds stood by while the other party acted to his detriment in performance of his own contractual obligations, the first party would be precluded by the Court of Chancery from claiming exoneration, on the ground that the contract was unenforceable, from performance of his reciprocal obligations; and the court would, if required, decree specific performance of the contract. Equity would not, as it was put, allow the Statute of Frauds ‘to be used as an engine of fraud’. This became known as the doctrine of part performance – the ‘part’ performance being that of that party who had, to the knowledge of the other party, acted to his detriment in carrying out irremediably his own obligations (or some significant part of them) under the otherwise unenforceable contract.”
In his judgment in Mackie v. Wilde, Barron J. stated (at p. 586):
“It must not be forgotten that ultimately the court is seeking to ensure that a defendant is not, in relying upon the Statute, breaking faith with the plaintiff, not solely by refusing to perform the oral contract, but in the manner contemplated from the passage from the judgment of Simon L.J. to which I have referred.
The doctrine is based upon principles of equity. There are three things to be considered:-
(1) the acts on the part of the plaintiff said to have been in part performance or of concluded agreement;
(2) the involvement of the defendant with respect to such acts;
(3) the oral agreement itself.
It is obvious that these considerations only relate to a contract of a type which the courts will decree ought to be specifically performed. Each of the three elements is essential. In my view, it does not matter in which order they are considered. Ultimately, what is essential is that:-
(1) there was a concluded oral contract;
(2) that the plaintiff acted in such a way that showed an intention to perform that contract;
(3) that the defendant induced such acts or stood by while they were being performed; and
(4) it would be unconscionable and a breach of good faith to allow the defendant to rely upon the terms of the Statute of Frauds to prevent performance of the contract.”
As to whether the essential requirements identified by Barron J. are present in this case, I would observe as follows:
(a) As I have already found, a concluded contract came into existence on 6th July, 2007, when all of the terms of the lease of 8 Richview were finally agreed and the plaintiff entered into the lease of those premises with the defendant.
(b) The plaintiff not only acted in a way that showed an intention to perform his contractual liability, that is to say, to enter into the lease of 8 Richview, but it actually did so. Moreover, it vacated No. 54 and indicated its willingness to assign its existing leasehold interest to the defendant.
(c) In this case, the defendant not merely induced and acquiesced in, but actively participated in the performance of the aspect of the contract by the plaintiff which the plaintiff performed, in that it was the defendant who granted the lease of 8 Richview to the plaintiff.
(d) In my view, it would undoubtedly be unconscionable and a breach of good faith to allow the defendant to rely upon the terms of the Statute of Frauds to avoid having to fulfil what remains of his contractual liability to the plaintiff, namely, the acquisition of the plaintiff’s interest in No. 54.
In attempting to resist the application of the doctrine of part performance, counsel for the defendant relied on statements in Farrell on ‘Irish Law of Specific Performance’ at para. 6.05, to the effect that, for a plaintiff to get as far as relying on part performance, there must be a concluded contract. For the reasons I have outlined earlier, I am satisfied that a concluded agreement did come into being on 6th July, 2007, under which the defendant became contractually liable to acquire the plaintiff’s leasehold interest in No. 54.
On the issue as to whether it was necessary for the plaintiff to plead part performance in the statement of claim, the Court was referred to a decision of the Supreme Court in Holohan & Anor. v. Ardmayle Estates (Supreme Court, 1st May, 1967, Unreported) in which judgment was delivered by Walsh J. In that case, at first instance, Kenny J. had awarded the plaintiff purchasers damages in lieu of specific performance, but, in measuring the damages, he had not factored in a deposit paid by the plaintiff purchasers which had not been returned by the defendant vendor. In the Supreme Court, counsel on behalf of the defendant made the point that the statement of claim should have pleaded that some part of the purchase money had been paid. On that argument, Walsh J. stated as follows:
“It is quite true that in former years, when pleadings gave considerably more information than they now give, it was customary to plead all the relevant facts, such as the making of the contract, the payment of the deposit, the ability and willingness of the plaintiff to complete and the refusal or failure of the defendant to complete. A great deal of information is now left to be sought by means of notice for particulars. In the present case, no notice for particulars was served by the defendants and, of course, the defendants were well aware that part of the purchase money had been paid as the defendants had received it. I do not think that the defendants’ objection of the pleading point is well founded. A decree for specific performance naturally does not depend upon the fact of whether or not a deposit had been paid, and the payment of a deposit is merely an incident, but not a necessary incident, of a sale. In my view, the plaintiff’s submission on this point is correct; the learned trial Judge erred in thinking it was necessary to expressly claim in the pleadings before it could be included as an ingredient of the damages.”
In outlining the case made in the statement of claim, I have emphasised, as the counsel for the plaintiff did, the plea that in further pursuance of the alleged agreement, the plaintiff had entered into the lease of 8 Richview. In effect, what the plaintiff pleaded was that it had fully performed, not merely part performed, its contractual obligation under the agreement in relation to that aspect of the transaction. In addition, the plaintiff has pleaded that it was, at all material times, ready, willing and able to complete the assignment of No. 54 to the defendant, which I am satisfied was the case on the evidence. In my view, the plaintiff is not precluded from relying on the equitable doctrine of part performance merely because it has not spelt out in the statement of claim or the reply its reliance on it.
Laches?
The manner in which delay has been invoked by counsel for the defendant in the defendant’s written submission is that, since the asset, the plaintiff’s leasehold interest in No. 54, was a wasting asset, being a lease of nine years and nine months, with no statutory right of renewal and with a break clause, and since it was an express condition of the contract that the landlord’s consent be obtained, it was an implied condition that it be obtained within a reasonable time and, indeed, before the break clause had to be exercised. The defendant asserted that it was not so obtained.
It was recognised by the parties from the outset that the consent of the landlord to the assignment of No. 54 was necessary and it was understood that it would have to be obtained. Steps were taken to obtain it and the matter had been well advanced before the concluded agreement came into existence on 6th July, 2007. It is unquestionably the case that the plaintiff’s solicitors should have moved immediately on receipt of the letter of 21st August, 2007, purporting to terminate the agreement to take No. 54, and that they should have finalised the issue of the landlord’s consent more expeditiously than they did. However, as I have already found, when Arthur Cox issued the letter of 14th December, 2007, the plaintiff’s solicitors had taken the matter of the consent to assignment as far as they could, pending the completion of the final formalities. The defendant should have completed within fourteen days. In my view, the delay by the plaintiff in getting its house in order for completion of the assignment of No. 54, by getting Mrs. Fasenfeld’s commitment to execute the Licence to Assign, was not of an order which would preclude the plaintiff from entitlement to equitable relief.
Estoppel
The plaintiff’s estoppel argument is based on the decision of the Supreme Court in Courtney v. McCarthy [2008] 2 IR 376. As I have found that the plaintiff is entitled to rely on the doctrine of part performance, it is not necessary for the plaintiff to resort to reliance on that decision. If it were, following the approach adopted by the Supreme Court, as set out in the judgment of Geoghegan J. at p. 391, the defendant would be estopped from refusing to fulfil the clear and unambiguous assurance he gave to the plaintiff, which was clearly intended to affect legal relations between them and to be so acted on, that he would acquire the plaintiff’s existing leasehold interest in No. 54. That is because the plaintiff acted on the assurance in taking the lease of 8 Richview and vacating No. 54, thereby altering its position to its detriment. In such circumstances, if the plaintiff had no other remedy, equity would afford the plaintiff relief against the consequences of the defendant reneging on his assurance, as he did.
Primary relief
The plaintiff is entitled to the primary relief it seeks, namely, an order for specific performance of an agreement whereby the defendant agreed to acquire the plaintiff’s existing title and interest in No. 54, that is to say, the leasehold interest created by the 2003 lease.
Damages
I am satisfied that the plaintiff has established an entitlement to damages in respect of the following outlay incurred by the plaintiff in respect of No. 54 since 1st January, 2008, which I am treating as the date on which the acquisition of No. 54 should have been completed by reference to the period of fourteen days after the letter of 17th December, 2007, calling on the defendant to complete:
(1) Rent under the 2003 lease which was at the rate of €30,000 per annum for the first two quarters, due on 1st January, 2008 and 1st April, 2008, and at the reviewed rate of €37,375 for subsequent quarters.
(2) Professional fees in the sum of €7,381 paid to Spain Courtney Doyle in connection with the rent review.
(3) Insurance on No. 54 in accordance with the terms of the 2003 lease.
(4) Rates and water rates paid to Dublin City Council.
(5) A sum of €4,494.60 incurred in respect of maintenance.
Before the order of the Court is drawn up, it will be necessary for the parties to agree the quantification of the rent, insurance and rates.
Order
The order will include the decree for specific performance and the award of damages which is to be quantified.
Higgins v. Argent Developments
[2002] IEHC 171
Judgment of Mr. Justice O’SuIlivan delivered the 1st of February 2002.
The plaintiff seeks specific performance of an agreement made on the 24th September, 1998 whereby he agreed to buy certain identified lands at Clonmel for £380,000 with a closing date of the 2nd of October, 1998 and with a booking deposit of £10,000. The plaintiff reached the said agreement personally with one Robert T. Nugent, auctioneer, as agent, he says, of the defendant.
Subject to an agency point there is no dispute that a concluded agreement was reached on the above terms but several points are made with regard to the sufficiency of a memorandum in writing prepared at the direction of Robert Nugent and signed by both parties on the 24th September, 1998.
BACKGROUND
Some background information is relevant. One John Butler who is the individual who personally gave instructions to Robert Nugent, was the owner of ninety nine of one hundred £1 shares issued in the defendant, the registered owner of the remaining share being his sister Josephine Butler who was also company secretary. John Butler bought the lands (comprising some 10.7 acres) which surrounded the plaintiffs residence at Davis Road, Clonmel in 1996. The defendant was incorporated the year before this transaction, the lands being taken in the name of the defendant company. Both the plaintiff and John Butler were interested in land development among other things and both can be regarded as experienced businessmen. The plaintiff was concerned about the development proposals of the defendant when it applied for planning permission for housing development on the lands and had a number of discussions in relation to this with John Butler. These resulted in an oral agreement whereby part of the site would be sold to the plaintiff but nothing came of these discussions because, the plaintiff says, the defendant failed to send on a contract.
On the 24th of September, 1998 the plaintiff was in Dublin on business and got a telephone call from Robert Nugent the auctioneer. I will go into what was said in more detail later; suffice to say at this point that Mr. Nugent indicated to the plaintiff that he had instructions from John Butler to sell these lands, and some others in Clonmel, and he wanted to know whether the plaintiff was interested. Negotiations followed and the agreement already referred to was reached on the telephone and it was then arranged that the plaintiff would call into Mr. Nugent’s office in Clonmel at about 6.30 p.m. to sign the agreement and pay a booking deposit of £10,000.
This happened in due course and the plaintiff was given an original copy of this agreement. Both parties had the same Solicitors at the time, namely Messrs. Kieran T. Flynn and Co. of Tipperary. Mr. Flynn agreed to act for both parties provided there was no disagreement but insisted that if there were then he would act for neither. Mr. Nugent contacted Mr. Flynn on the 25th of September and furnished him with a copy of the agreement (or memorandum of agreement – there is an issue on this) but with the closing date now altered from the 2nd to the 26th of October, 1998. Mr. Flynn sent out a standard form Law Society contract on the 28th September, 1998 with a closing date of the 22nd October, 1998 and it is clear from a discovered note of his attendance on John Butler that the latter expressed the hope that the sale might be completed on the 22nd of October rather than the 26th of October which was a Monday. The solicitors wrote to Mr. Nugent’s firm on the 12th October, 1998 making the point that the ownership of the land is vested in the company as distinct from John Butler, that there cannot be any binding agreement with the company unless and until the latter holds a meeting and passes a resolution that such a meeting would be convened and he would be informed of the outcome. This letter stated “you may wish to inform Mr. Higgins of the position as set out above”.
The plaintiff was duly informed of this situation but not until ten days later namely on the 22nd of October, coincidentally the closing date on the contract which had been sent out by Mr. Flynn on the 28th of September. On the 21st October, 1998 the plaintiff wrote to his solicitors Kieran T. Flynn and Co. replying to their letter of 28th September (enclosing the contract) referring to an archaeological problem which had been more serious than envisaged but professional advice had indicated that these difficulties could be overcome and he indicated that he would be in a position therefore to return the contract signed with deposit very shortly. In fact the letter under reply had enclosed a standard form contract with a closing date for the 22nd of October, the next day. On the 22nd of October (the closing date) Messrs. Flynn wrote to the plaintiff enclosing a copy of their letter of the 12th instant to the auctioneer (dealing with the ownership and company resolution). On the 28th of October they acknowledged receipt of the contract together with a cheque for £28,000 (being the balance of the contractual deposit of 10%). They told him that they would advise the defendant of receipt of same and would hold the cheque.
On the 5th of November the plaintiff wrote to his own solicitors wondering whether the vendors intended to close the sale and on the 10th of November his solicitors write to advise that they have heard from the defendant to the effect that the board has resolved not to enter into a contract with him and directing the return of any deposit that he may have received. They returned the cheque for £28,000 with that letter. The plaintiff initially asked for a return of his booking deposit of £10,000 from Mr. Nugent but quickly corrected this (clearly on advice of his new and present solicitors) and indicated that he was going to call for the immediate closure of the sale as per contract. These proceedings were commenced on the 18th of December of the same year.
THE DISCOVERED ATTENDANCES
Before considering the evidence I will at this point set out in summary form the relevant contents of a number of attendances by the parties’ common solicitors, Messrs. Kieran T. Flynn and Co. of Tipperary on John Butler and his sister in the days immediately following the making of the agreement on the 24th September. Whilst these attendances were discovered late in the day (following argument relating to relevance and privilege between the parties) they form a contemporaneous record of the attitude of the defendant in particular at a highly material time and have been admitted in evidence by consent.
On the 28th September, 1998 Mr. Raymond Flynn attended on John Butler. The latter indicated he was hoping if at all possible that the sale might be completed on the 22nd of October rather than the 26th which was a Monday. There was discussion about way-leaves and planning permission and Mr.Flynn emphasised that the sale was not subject to planning. He said he believed the purchaser was aware of an existing convenant regarding building on the land and that he, Mr. Higgins, had indicated he was satisfied it could be circumvented. Just after the consultation he was telephoned by Josephine Butler, querying the “rumour” that the property had been sold to the plaintiff. She indicated that she would have to have an input into any sale since she was a director of the company which held the land. She indicated that she might not be speaking to John Butler within the next few days. Mr. Flynn mentioned that properly speaking a resolution was required from the company but did not mention to her that the document of the 24th of September on the auctioneer’s note paper, addressed to the plaintiff apparently committed John Butler to a sale, but did not mention the defendant, the correct owner.
A memorandum of the same date records the fact that both John and Josephine Butler are directors of the defendant company, John holding ninety nine of the hundred issued shares and Josephine the other one share. The memorandum records that apparently Josephine Butler is opposed to the proposed sale. It goes on to say ‘It has been suggested that she be removed as a Director”. It then indicates a legal mechanism whereby this can be achieved. It is a reasonable inference that the solicitor’s instructions from John Butler were to proceed with the sale and if necessary to remove Josephine Butler from the company. This inference was explicitly drawn in court by counsel for the plaintiff and not rebutted: the defendant did not call evidence in this case.
A later attendance dated the 30th of September is on John Butler, Michael Butler (his brother) and Josephine Butler. This now records that in the previous discussion with John Butler it was evident that he obviously knew nothing of the negative attitude of Josephine Butler towards the sale. Furthermore he was quite annoyed at the negative attitude towards the sale, and the solicitors understood that he was moving towards having her removed as a director of the company. It seemed that Josephine was being encouraged in this attitude by her brother Michael Butler.
At the meeting on September the 30th however it seemed to the solicitor that John Butler now seemed to be “joining forces with Michael Butler and Josephine Butler with a view to nullifying the sale”. Advice was given (but not disclosed) regarding how far the memorandum of the 24th of September would be binding but it is recorded that John Butler was disappointed with that advice and that he now wanted to get out of the transaction. He apparently believed there were other interested parties who would have paid more for the property and there is some discussion about this. There was some further discussion about John Higgins querying the authority of the auctioneer to sign on his behalf. A further attendance on John Butler dated the 8th October, 1998 records John Butler as saying that he had been offered £500,000 for all the lands excluding the covenant (which he feels can be set aside) and reference is made to a further offer of £400,000 from one Michael Reilly.
On the 9th of October there is an attendance on John Butler who is critical of the letter prepared by the auctioneer on the 24th of September against the background of a higher offer from Michael Reilly. Reference is made to a further offer of £1.25 million but subject to planning permission. Advice was given that the company would have to make up its mind one way or the other and on the 12th of October, 1998 there is an attendance on Josephine Butler who approved the letter sent on that date (dealing with a resolution of the company) once she was satisfied that such letter did not commit the company to any particular outcome of its resolution.
As I indicated John Butler did not give evidence. It is clear that following the agreement of the 24th of September he wished to proceed with the sale and at one point was considering removing his sister if she objected. However, he was persuaded by his sister and brother to change his mind and again it is clear that the context was that he thought that he could get more money from other purchasers.
THE 24TH OF SEPTEMBER. 1998
As already stated the agreement was reached on this day. The dealings between the plaintiff and Robert Nugent culminated in the signing by these parties of a letter prepared by the latter and since the issues arising relate to this letter I will now set out the text in full.
It is on the headed note paper of Stokes and Quirke, the auctioneering firm of Robert Nugent. At the head is the date 24th September, 1998 and it is in the form of a letter addressed to Mr. John Higgins, Davis Road, Clonmel. The heading in manuscript which the evidence shows was present when the letter was signed by both parties is “re lands at Davis Road. Clonmel. circa 10.7 acres”. The text of the letter is as follows:
“Dear Mr. Higgins,
We, as agents, for the vendor, Mr. John Butler hereby agree the sale of the above lands to John Higgins subject to the following conditions:-
(1) Sale price £380,000.
(2) Good marketable title.
(3) Deposit £10,000.
(4) Closing date 2nd October, 1998.
We also hereby acknowledge receipt as at No. (3) above”.
It was signed by Robert T. Nugent on behalf of the vendor and by John Higgins on his own behalf. Under that was a P.S. as follows:-
“P.S. We will furnish any documents required by the purchaser.”
Submissions
A number of points are made in relation to this by the defendants as follows:
1. The vendor is not Mr. John Butler as stated but rather the defendant company. Robert Nugent was not acting as agent for the company and had no authority from it.
2. As the evidence shows the lands were subject to a restrictive covenant relating to building and an archaeological problem. This was known and agreed. The reference to “good marketable title” is therefore inaccurate.
3. The plaintiff agreed to pay a 10% deposit which was £3 8,000. The reference to a deposit at £10,000 is, again, inaccurate.
4. In relation to the closing date, namely the 2nd October, 1998 on the version of this letter which was given to the plaintiff (Mr. Nugent subsequently altering the closing date to the 26th of October without consultation with the plaintiff but with the approval of the defendant), time was of the essence as the evidence shows and therefore once time had gone by there was no contract. For his part the plaintiff through his counsel resists all the foregoing and also insists that the letter of the 24th September, 1998 is itself the agreement as distinct from being a note or memorandum thereof. The language used (“we… hereby agree”) is the language appropriate to the creation of an agreement. Accordingly it is complete of itself and deals with all the essential terms, the other matters being collateral.
The Evidence
The plaintiff said that he received a phone call from Mr. Bobby Nugent on the afternoon of the 24th September, 1998 when he was in Dublin on business. Mr. Nugent told him that he had instructions from John Butler to dispose of these lands and wanted to know would he be interested. He said he possibly would but he made it very definite throughout that he did not believe or trust that any agreement he might make on the phone would be honoured. This was from previous experience. If he did make an offer and a price was struck “it would have to be binding”. He was told that Mr. Butler was looking for £400,000 and he offered £300,000. He was persuaded to increase that to £350,000 for a definite deal and Mr. Nugent said he would telephone Mr. Butler whom he told him was at the other end of a telephone in his office. Mr. Nugent got back shortly, maybe twenty minutes later, and said the offer of £350,000 was not adequate. John Higgins suggested splitting the difference and was told he would be getting nearer the mark. Mr. Nugent again broke off to consult with his client and came back again after ten to twenty minutes. He said that if he would top it up with £5,000 making a total price of £380,000, he had authority to conclude a deal. John Higgins agreed strictly on the condition that that was the limit of the offer and that it was for a contract that was final. Mr. Nugent confirmed that he had definite instructions to dispose of the lands that Mr. Butler was happy with the price and they then made arrangements for signing the letter later that evening.
John Higgins arrived later that evening and he met Mr. Nugent and his partner in the firm. Mr. Nugent came back with the letter, requested a cheque, John Higgins signed and Mr. Nugent signed and gave him the original. The manuscript legend appearing on it was present when he signed and John Higgins said he was happy with it as it contained the price which was the main fact as far as he was concerned. He assumed it was a binding agreement, and it was not subject to contract or anything which he would not have been prepared to accept. He was conscious of the closing date but accepted it. As far as he was concerned that was a matter for the auctioneer or the vendor’s solicitors. He was prepared to close whenever called on to do so.
Under cross-examination he accepted that Robert Nugent was dealing on behalf of John Butler and it was put to him that he was informed that the closing date was critically important. He said “no” and repeated this and said that it was not at all correct that he was told that if he did not close on that date the whole deal could unravel. He insisted that that was not correct. He agreed that a closing date less than 10 days after the deal was tight but said “you see, the closing date was not of my making at any point”. He accepted that the closing date or various things like that remained to be agreed between the solicitors and said “any closing date I would have been called to honour. I would honour. I was in a position to honour”.
He agreed that what was discussed was a 10% deposit with a booking deposit of £10,000. He also agreed that the balance of the deposit was to be paid on the signing of the contract and that the solicitors would prepare a contract. When it was put to him that he was informed that it was John Butler who was the vendor, he said “yes, John Butler was referred to and Argent Developments was referred to and I wasn’t really making the distinction between the two”. He had been told that Mr. Nugent had instructions from John
Butler to dispose of these lands rather than, explicitly, that John Butler was his client. He accepted that Mr. Nugent was acting for John Butler.
There was not really much discussion between him and the auctioneer as to title, he was aware that there was a restrictive covenant but he could not be sure that it was discussed. There was no discussion in relation to a national monument. There was no discussion in relation to way-leaves over the land. He accepted that these would all affect good marketable title. The arrangement regarding the deposit was that he was to pay Mr. Nugent £10,000 and the balance of the 10% deposit would be paid on receipt of the contracts from his solicitor.
It was put to him that his own letter to Mr. Flynn of the 21 st of October indicated that he himself had some reservations about the archaeological monument on the lands and that he was taking the lands subject to this. He disagreed that he was wondering whether he would go ahead because of this and responded to that suggestion by saying ‘fro. I was not considering that because, as far as I was aware, at that stage. I would have no alternative but to honour the contract, or the memorandum”. He accepted that the date (2nd of October) was critical but insisted that the change from that date was not of his making. He said he assumed the agreement was binding once it did not contain the phrase “subject to contract”.
The only other witness in the case was Robert Nugent the auctioneer. He said he had acted for the Butlers before this occasion and was involved in advising how to develop these lands. John Butler came in to him early on the afternoon of the 24th of September and appeared to be under a lot of pressure and his wish was to sell the lands and possibly other lands as well. He was asked to get it moving as quickly as possible. As soon as he heard this the plaintiff’s name sprung to mind because he had tried to negotiate with him on several occasions before. He therefore rang his orifice with Mr. Butler’s agreement. Mr. Butler’s instructions were to conclude a binding agreement for the sale of these lands as quickly as possible. His recollection was that Mr. Butler was present with him in the earlier part of his telephone negotiation with John Higgins when the latter offered £300,000. Mr. Butler then excused himself and went across the road to a hotel, the Clonmel Arms and Robert Nugent would have walked across to him as the negotiations progressed.
He would have said to the plaintiff something like “it has to happen quickly or it won’t happen at all.” When John Higgins offered £350,000 he said he would have conveyed that to John Butler and told him that he thought he could get more. John Butler was a bit concerned that he might lose John Higgins if he pushed it but he felt fairly confident that he could get more money. His next conversation with John Butler was that he had got £380.000 “and the relief on John Butler at that time, it was quite incredible”. He said he discussed with John Higgins the restrictive covenant, the archaeology (briefly) and he would have been told by John Higgins that he was aware of it. When he created the document of the 24th of September his intention was to write a letter on behalf of Mr. Butler as strong as he could write it. He instructed that the date be changed (from the 2nd of October to the 26th) on the copy which he sent to Kieran T. Flynn Solicitors.
I note in passing that the plaintiff became aware of the altered closing date on the Law Society’s contractual form when he received this from his solicitor under cover of a letter dated the 28th of September. The first time that the change in the closing date on the letter of the 24th of September became known to the plaintiff and his legal advisors was in court on the 1st day of the hearing when the solicitor’s copy of this letter was discovered. The pleadings rely on the 2nd of October as the closing date and the evidence is that this was the closing date on the letter when the plaintiff signed it and that this date was changed by Robert Nugent after the plaintiff had signed it and without the plaintiff being aware of this change. When this document came to hand, the plaintiffs counsel discussed it with Mr. Nugent, his witness, who then recalled that he had in fact made the alteration. In evidence Robert Nugent says that he changed the closing date because in his opinion “it wasn’t physically possible to close a sale in ten davs. It was a typographical error, as far as I was concerned. John Butler would have been aware that I changed the date to make it a month”. He instructed the change, he did not personally make it himself. He did have John Butler’s agreement to change this date. He said that John Higgins attitude to having concluded a deal was the same as that of John Butler namely he wanted to have a deal. “He wanted to have it done and dusted. He didn’t want any messing.”
Under cross-examination he denied that Michael Reilly had made a firm offer of £400,000 for the land. He said that John Higgins had signed the memorandum prepared to accept the closing date on the 2nd of October. Then it was put to him that in regard to the closing date he had said “this has to happen, the closing has to happen. If it doesn’t happen, it won’t happen at all”. He said that that was correct. He acknowledged that at some stage in his conversation with John Higgins it was agreed that he would take the property “warts and all”. This was a reference to the archaeological problem, the restrictive covenant and other terms and conditions. He agreed that they were essential terms but added “… covered under good marketable title”. He agreed that John Butler had to get the money fast and accepted that time was critical, and of the essence and that the closing date was vital and central to the contract. That date was the 2nd of October.
In fact the deal was not closed on the 2nd or on the 22nd. On re-examination he said that his view of the 2nd of October was that it was impossible. He therefore changed the date to the 26th. Mr. Butler was aware and approved this. The 2nd of October was a typographical error and he realised when he read it properly that that was a wrong date. In his discussions with Mr. Butler he would have anticipated a one month closing or thereabouts. To myself, he said that his discussions with the plaintiff would have been on a one month’s closing date basis. His reference to “this has to happen”, and “if it doesn’t happen it won’t happen at all” referred to the closing of the deal a month after the 24th of September.
WHAT WAS AGREED?
Quite clearly the price was agreed. This was the most crucial aspect so far as the plaintiff was concerned. He also wanted a binding agreement and both himself (he was happy once the letter of the 24th of September did not contain “subject to contract” or anything like that) and Robert Nugent intended to make the letter of the 24th of September as binding as Mr. Nugent could make it.
The evidence in relation to a closing date is confused. It is clear that John Higgins would have accepted any closing date and was ready to pay the agreed price whenever he was asked. There is no challenge to this evidence. His evidence is that he accepted the 2nd of October as being a tight closing date but that was a matter for the vendor and his agent.
Robert Nugent’s evidence is self-contradictory on this point. He changed the date on the letter from the 2nd to 22nd of October after the plaintiff had signed the letter without the plaintiff knowing it but with the agreement of John Butler. That was his evidence in chief. Under cross-examination he said that the plaintiff was prepared to accept the closing date on the memorandum as the 2nd of October and that he signed it knowing it was the 2nd. He agreed that he said “if it doesn’t happen, it won’t happen at all”. In regard to that, time was critical and of the essence. On re-examination, however, he said that the date the 2nd of October was a typographical error and that once he read the letter properly afterwards he realised that that was the wrong date. He checked the alteration (to the 26th of October) with John Butler but not with John Higgins. To me he said that when he was referring to “this has to happen: if doesn’t happen it won’t happen at all” he was referring to closing within the month and the closing date he was discussing (with the plaintiff) was the 26th of October.
I have the distinct impression that Robert Nugent was confused. I think he was attempting to answer the questions as best he could but it is clear from the foregoing summary of his evidence that he contradicted himself and on this point I prefer the evidence of the plaintiff to the effect that the closing date was agreed to be the 2nd of October, 1998.
It does appear that Robert Nugent used a phrase such as “if this doesn’t happen, it won’t happen at all” but it is not clear whether this was in relation to the making of agreement on the 24th of September (as suggested by Mr. Gordan on behalf of the plaintiff) or in relation to one or other of the two closing dates referred to in his evidence. It is on the basis of this phrase, primarily, that Mr. Brady S.C. suggests that time was of the essence in this contract. Against this submission is the evidence of Robert Nugent to the effect that when he carefully read the letter of the 24th afterwards he realised that this date (2nd October) was wrong, was a typographical error and he changed it off his own bat with the authority (given either before or after the change) of John Butler but without referring back to the plaintiff. This is entirely inconsistent with an agreement which would have made time of the essence as understood by lawyers. Furthermore there is nothing in the attendances of the Solicitor acting for both parties at the time which even hints at the notion that time was of the essence (as understood by lawyers) and indeed the contents of one attendance indicates that John Butler’s attitude was that he would prefer to have the closing date on the 22nd rather than the 26th of October which was a Monday. From the side of the plaintiff, on this aspect of the agreement, it is perfectly clear that he was prepared to close on any date that the vendor could deliver. It is fully acknowledged that he was a man of means and would have been able to pay the purchase price at very short notice.
I hold that it was not agreed between the plaintiff and Robert Nugent that time was of the essence. Clearly Mr. Higgins wanted a binding agreement and Mr. Butler wanted his money as quickly as possible. The matter was urgent, important and in this sense critical. It was not of the essence, as known to lawyers, however, in the sense that if the day agreed passed the whole deal was off. Mr. Nugent clearly did not take this view of what he had just agreed when he unilaterally altered the date of the agreement.
AUTHORITY TO AGREE
Clearly Robert Nugent was acting, as the letter of the 24th of September says, as agent for Mr. John Butler. The question is did he have authority, actual or ostensible, from the defendant? Clearly John Butler was giving Robert Nugent instructions. Who else could give instructions to Mr. Nugent on behalf of the company other than John Butler? In my opinion Robert Nugent had the actual authority to act as agent on behalf of the defendant Company. I note in this context the observations of Me William J. at page 10 of the unreported judgment delivered the 5th of May, 1978 inHowiin v. Thomas F Power (Dublin) Limited and also of Costello J. (as he then was) in Guardian Builders Limited v. Kelly and Anor. (19811.L.R.M. 127 at p. 131-132). All that is required is that the vendor can be readily identifiable from the written document. The plaintiff was able to achieve this task with minimum endeavour.
MEMORANDUM OR AGREEMENT?
Mr. Gordan S.C. for the plaintiff submits that the letter of the 24th of September is itself the agreement. Mr. Brady S.C. says that this cannot be the case because the solicitor subsequently sent out a Law Society contract and in any event the deal was done on the telephone not through the medium of the letter. The letter is a memorandum and not the agreement itself. Moreover, if this is the agreement the terms are not those agreed on the telephone.
The plaintiff and John Butler were experienced businessmen. They were both interested in development. They were both familiar with the lands and they had both had dealings with each other already over these lands. I accept the evidence of Robert Nugent that John Butler wanted a deal done as quickly as possible. Clearly he needed money or at least an agreement that would be binding as soon as possible. John Higgins was less concerned with speed.as with certainty. He wanted something binding. His offer which was accepted was made on the basis that it was his final offer, that he would get a binding agreement and that there would be no messing. This was based on his earlier experience.
There is much in Mr. Gordan’s argument to the effect that the letter of the 24th of September, 1998 is itself the agreement. The evidence of Robert Nugent is that he wanted to make it as binding as he could. It is clear that John Higgins was prepared to accept the property “warts and all” meaning subject to the archaeological problem, the way-leave problem and the restrictive covenant. He was not concerned with these relative niceties; he felt that he could overcome some of them. He wanted the land to protect his own residence. For him the essentials of the deal were the identity of the lands and the price. For John Butler the essentials were the price and getting a deal done as quickly as possible. Both achieved their objective in the letter of the 24th of September 1998. Everything else was subsidiary and whilst I have some doubt about it I accept Mr.Gordan’s proposition that it is this letter which is the agreement between the parties.
Mr. Brady S.C. in response to a question from me indicated that it is possible to have an agreement (as distinct from a memorandum thereof) as contemplated by s. 2 of the Statute of Frauds 1695 without any prior verbal communication between the parties. He instanced an agreement which came into being through correspondence. I accept his point but I do not think that this is the only example of an agreement as distinct from a memorandum thereof within the contemplation of the Statute of Frauds. Clearly John Higgins wanted a binding agreement and equally clearly he did not get that until he saw a letter which did not contain the phrase “subject to contract” which he signed. It was then and only then that he got his agreement when he paid his booking deposit. The relief which John Butler had earlier experienced was in anticipation of a deal being done that evening.
A further point is made, however, that the letter of the 24th of September 1998 is wrong because it records the title as “good marketable title” when in fact that was not ever agreed and furthermore it records the deposit as £10,000 when in fact it was 10% (£38,000).
With regard to the good marketable title point my view of the evidence is that the two individuals who reached the agreement were not using this phrase as lawyers would use it but rather, as Robert Nugent said in the evidence, as a phrase to cover the title which included the restrictive covenant and so on. In my view one must construe the agreement from the point of view of those reaching it and on the evidence those making the agreement meant no more than that the vendor would be able to make title to the property.
With regard to the point in relation to the deposit it is clear that the letter of the 24th of September is referring to a booking deposit which is formally receipted immediately before Robert Nugent’s signature. The existence of or amount of a deposit was not, on my view of the evidence, an essential term of the agreement. This is more readily understandable in the context of a very short closing date. The only essential term was that the agreement be binding. [satisfy the statute], what is material or essential must be considered, at any rate primarily, from the point of view of the parties themselves”.
Furthermore it seems to me that if, contrary to the above conclusion, this phrase is properly construed to mean that the purchaser was entitled to and agreed to take from the vendor (who also agreed to give) the lands free from any archeological impediment, restrictive covenant or way-leave, then this is a term exclusively for the benefit of the purchaser and he is entitled to waive it, as he does, and get his specific performance of the less advantageous title.
In this context Mr. Brady S.C. submitted that the authorities only showed that where there was no reference in the memorandum to the relevant term, then the plaintiff can waive it but he submitted that there is no case to the effect that were there is a mistake in a reference in the memorandum the Plaintiff can waive the excess of advantage, so to speak, by reason of the mistake. Not only does this seem contrary to principle, but in fact in the present instance the question of title one way or another was not an essential term at all. The plaintiff was clearly prepared to take the property as it was (“warts and all”) and the primary meaning as understood by the two parties negotiating of the phrase “good marketable title ” was that the land was to be marketable. If this phrase is to be construed as meaning what lawyers intend it to mean then it refers to something quite different to what was discussed and agreed and that something different is for the exclusive benefit of the plaintiff and the plaintiff is entitled to waive it. He still is entitled to have the property conveyed to him on the basis agreed and in doing this he is waiving absolutely the advantage conferred upon him at Item (2) of the letter of the 24th of September, 1998. Seen in this way, in my opinion, the authorities on waiver apply and can be availed of and are availed of by the plaintiff in this case.
Not quite the same considerations apply to the reference to the deposit. In my view this reference is simply to the booking deposit which is receipted. It is not a reference at all to the contractual deposit of 10% of the purchase price which was to be paid on signing the written contract. If the letter of the 24th of September is to be regarded as a memorandum of the agreement rather than the agreement itself then it is relevant that the parties did not consider that a deposit was essential at all: rather in relation to the deposit what was agreed was that there should be a booking deposit of £10,000 paid on the 24th of September and this is what the memorandum records.
In this context I am, of course, aware of the decision of Finlay C.J. in Boyle v. Lee [1992] 11. R. 555 . I fully accept what he said at page 571 as follows;-
“The amount of a deposit to be made, even if a purchaser is willing to make a deposit of the appropriate amount or the usual amount then experienced in transactions in Dublin, is too important apart of a contract for the sale of land in the large sum of £90,000 to be omitted from a concluded and complete oral agreement unless the parties in such an agreement had agreed that no deposit would be paid. In this case the evidence irresistibly leads to the conclusion that both the first Plaintiff and Mr. McManus agreed that there had to be a deposit, but left it over to be agreed between the solicitors when the formal contract was being settled as to its amount and form. In my view, that evidence, which was not in contest, must lead to a conclusion that there was not a complete contract….”
As has been pointed out by Geoghegan J. in Shirley Engineering Limited and Irish Telecommunications Investment Pic, unreported, High Court, 2nd December, 1999, and also by the same judge in Supermacs Ireland Limited and Anor v. Katesan (Naas) Limited andAnor [2000] 41. R. 273 Finlay C.J. in Boyle v. Lee was dealing with the issue whether there had been a concluded agreement or not. The paragraph cited has no bearing on what should be contained in a memorandum of a concluded agreement to satisfy the statute. For the latter purpose the material or essential terms only are required.
It seems to be perfectly competent for the parties to agree in relation to a deposit either that there need not be one or that once there is payment of a booking deposit that the payment of the balance of the agreed deposit is something that would happen in ordinary course. That is exactly the position that applies here. The parties wanted a binding agreement, a document that did not contain the phrase “subject to title” : once they had that the other elements of the deal (apart from price and identity of the lands) were not essential terms and as such did not require to be contained in the memorandum.
The fact that the letter of the 24th September, 1999 makes reference to the booking deposit is entirely consistent with this approach. So also, in my view, is the fact that there is no reference to the 10% deposit because this was not a term that was vital or critical to the parties. Time was, and time is referred to. (But time was not of the essence as lawyers would understand it.) The identity of the land was and that is referred to. The price was and that is referred to. These were businessmen familiar with the subject on which they were negotiating and who knew what were the crucial elements of the deal were – what were, to use the phrase “deal breakers” or “deal makers”. The amount or existence of the agreed deposit was not in that category. As I understand the authorities on this point, the memorandum in these circumstances, if such be the letter of the 24th of September, is sufficient to satisfy the statute.
Finally there is the question of the closing date. The agreement specifies the 2nd of October. Such an early date was not a matter of concern to the purchaser. He would have closed on any date called upon to do so. The time agreed, I have already held, was not of the essence. The defendant through his agent adopted and ratified a later closing date. He then failed to meet it. The vendor was ready and willing to complete at all material times and this has not been questioned by the defendant.
Accordingly even if I am incorrect in holding that the letter of the 24th of September, 1998 is itself the agreement which the plaintiff is entitled to have specifically performed by the defendant, I hold that this letter contains the essential terms which were agreed upon namely the identity of the land, the amount of the price and an early closing date (subsequently and unilaterally waived by the defendant). It was also essential to the parties that this written document should be binding and in this regard it was crucial that it did not contain the phrase “subject to contract”. The letter of 24th September correctly records all of these essential terms and is a good memorandum.
Accordingly the plaintiff is entitled to a decree of specific performance as claimed.