Aranbel Ltd v Darcy and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 09 July 2010
• Neutral Citation: [2010] IEHC 272
• Docket Number: [2008 Nos. 8805, 8806 and 8807 P]
• Court: High Court
• Date: 09 July 2010

Aranbel Ltd v Darcy & Ors

BETWEEN

ARANBEL LIMITED

PLAINTIFF

AND

STEPHEN DARCY AND LINDA CRAMPTON

DEFENDANTS

ARANBEL LIMITED

SEAMUS MCGIVERN AND AUDREY MCGIVERN

ARANBEL LIMITED

RICHARD DARCY AND MARY DARCY

[2010] IEHC 272

[No. 8805 P/2008]

[No. 8806 P/2008]

[No. 8807 P/2008]

THE HIGH COURT

SALE OF LAND

Contract

Specific performance - Damages - Impossibility - Impecuniosity of purchaser - Mount Kennett Investment Ltd v O'Meara (Unrep, Smyth J, 21/11/2007) considered - Damages awarded in lieu fo specific performance (2008/8805, 8806 & 8807P - Clarke J - 9/7/2010) [2010] IEHC 272

Aranbel Ltd v Darcy

Facts The three separate sets of defendants herein all signed contracts in 2006 to buy property in an apartment complex in County Dublin. By March 2008 each defendant was legally obliged to complete the sales of the respective apartments but they failed to do so. The plaintiffs in each of these proceedings sought an order for specific performance. It was accepted on behalf of the defendants that binding contracts were in place and that the defendants were in breach of their obligations. However, it was argued on behalf of the defendants that they were no longer in a position to complete the sale in question and that specific performance should not, therefore, be ordered. In those circumstances, it was argued that the court should order damages in lieu of specific performance. Each of the defendants also argued that the Court should exercise its discretion to refuse specific performance on the grounds of alleged delay on the part of the plaintiff in issuing these proceedings. The parties herein filed affidavits, replying affidavits and statements of assets and income prepared by a person with financial expertise.

Held by Clarke J. in awarding damages in lieu of specific performance: That where it is clear on the evidence that a party would not be able to comply with a court order, in this case an order for specific performance, then a court should be most reluctant to make such an order. Having regard to the contents of the statement of affairs, completion of the contracts for sale by each of the sets of defendants in these proceedings would be impossible as those defendants did not have available assets or borrowing capacity which would have enabled them to pay the sums contracted for. In those circumstances, the making of an order of specific performance would be in vain and therefore such an order should not be made.

Reporter: L.O'S.

MOUNT KENNETT INVESTMENT LTD v O'MARA UNREP SMYTH 21.11/.007 2007/42/8875 2007 IEHC 420

LARK DEVELOPMENTS LTD v DUBLIN CORPORATION UNREP MURPHY 10.02.1993 1993/4/856

1. Introduction

2 2 1.1 Many people who bought property at the height of the market are now in significant financial difficulty. Those who bought homes at that time, largely based on borrowing, face very significant negative equity. Those who bought investment properties are faced with significant losses. Many such persons have now come before the courts faced with difficulties relating to meeting their obligations on loans taken out to fund the relevant purchase.

3 3 1.2 However, there is a second category of persons who entered into contracts to buy property at or near the peak of the market, who are now faced with being called on to complete the relevant sales at a time when the agreed purchase price significantly exceeds the current value of the property concerned. These three connected cases involve such a situation. The cases are not untypical in one sense. The relevant contracts were signed in September and October, 2006. Each contract related to a separate apartment in a development known as Fortunes Lawn at Citywest in County Dublin. The properties were purchased at a time when it was anticipated that it would take another year or so for the building works relevant to the properties concerned to be completed. That, in due course, happened and the parties were called on to complete in October, 2007. In some of the cases there were further completion notices which pushed back the completion date until the Spring of the following year. It is not disputed but that by March of 2008 each of the defendants in the respective proceedings was legally obliged to complete the sales of the respective apartments which they had contracted to purchase.

4 4 1.3 There is, however, one unusual feature of these cases. In past times when the property market was either increasing, stagnant, or at worst suffering a minor reversal, it was common place that sellers who found a purchaser either unable or unwilling to complete, simply forfeited the relevant purchaser's deposit, kept the property, and went on to deal with the property as the seller concerned wished.

5 5 1.4 In more recent times, it has the been the experience of the courts that a number of cases have been brought where the seller concerned asserts that the forfeiting of the relevant deposit is insufficient to compensate for the difference between the contract price and the price which the vendor could now get for the property in question. Given that deposits are typically fixed at 10% of the purchase price, and that property prices have, it would appear, fallen by upwards of 50%, it is hardly surprising that that case is made. The extent of the difference does, of course, depend on the facts of each individual case.

6 6 1.5 However, what is sought by the plaintiffs ("Aranbel") in each of these proceedings is an order for specific performance. Counsel for the defendants in each of the cases has quite properly accepted that there was a binding contract in place and that his respective clients are in breach of their obligations under that contract by not having completed the sale in each case at the time when each set of defendants was legally obliged so to do. That Aranbel is entitled to relief in those circumstances is not disputed. However, in substance it is argued on behalf of each of the sets of defendants that they are no longer in a position to complete the sale in question and that specific performance should not, therefore, be ordered. In those circumstances, it is contended on behalf of each of the sets of defendants that the Court should order damages in lieu of specific performance with those damages to be assessed in a manner yet to be determined.

7 7 1.6 While not unique, it is unusual for a developer such as Aranbel to seek specific performance in those circumstances. These cases, therefore, raise the general question of the proper approach which the Court should take to such a claim.

2. Specific Performance

2 2 2.1 As the term implies, an order for specific performance is an order which requires the relevant defendant to complete the contract which is the subject of the proceedings in question. Specific performance is an equitable remedy. It has often been said that equity will not act in vain. A court should, therefore, be reluctant to make an equitable order where there is no reasonable prospect of the order concerned being complied with. I should add one qualification to that statement. There obviously may be cases where persons may simply decline to obey an order of the court. The fact that a party might be most unlikely to obey a court order could not, in my view, be a reason for the court not making the order in the first place. However, where it is clear on the evidence that a party would not, in fact, be able to comply with a court order, then a court should be most reluctant to make such an order.

3 3 2.2 It needs to be emphasised that there is a whole spectrum of circumstances with which a court might be faced where it is said that difficulty might be encountered by a party in completing the sale of a contract for land. In many of the decided cases there was a legal impossibly in completion. A vendor might not have title. There would, in an ordinary case, be little point in making an order for specific performance against a vendor who did not have title although, in an appropriate case, ( see Mount Kennett Investment Ltd v. O 'Mara [2007] IEHC 420) a court may make an order for specific performance where it is satisfied that the vendor concerned has it within its power to cure any problem with its title.

4 4 2.3 Indeed Mount Kennett is an example of, perhaps, an intermediate case. On the facts of that case, Smyth J. was satisfied that the vendors concerned would be able to comply with their contractual obligations provided that they were prepared to offer a sufficient sum to buy in a freehold interest in the property in question sufficient to satisfy the Charity Commissioners as to the adequacy of the relevant consideration. In other words, the vendors could cure their title provided they were prepared to pay a sufficient sum of money to procure the relevant consent. In those circumstances specific performance was ordered. There will, therefore, be cases where, to a greater or lesser extent, there is a realistic possibility that a party may be able to complete the sale in question within a realistic timeframe. In those circumstances, a court may well consider that specific performance is appropriate on the understanding that if, despite best endeavours, it proves impossible to complete for whatever reason, then the court may be constrained to discharge the order of specific performance and direct that damages in lieu be assessed. At the other end of the spectrum there will be cases where, while there may be some technical difficulty in a defendant completing, the court is satisfied that any such difficulty can readily be overcome by the defendant concerned. In such circumstances, and in the absence of any good reason for not ordering specific performance, it would normally follow that the court would direct specific performance of the contract concerned.

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