Begley v Damesfield Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Donnelly
• Judgment Date: 26 June 2020
• Neutral Citation: [2020] IECA 171
• Docket Number: Court of Appeal
• Court: Court of Appeal (Ireland)
• Date: 26 June 2020

BETWEEN/

MICHAEL BEGLEY

PLAINTIFF/RESPONDENT

-and-

DAMESFIELD LIMITED, JOHN LALLY

AND

THE JOLLY MANAGEMENT COMPANY LIMITED

DEFENDANT/APPELLANT

[2020] IECA 171

Donnelly J.

Faherty J.

Ní Raifeartaigh J.

Court of Appeal

Record No: 2018/168

Damages – Breach of contract – Liability – Appellant seeking to appeal against order awarding respondent damages against appellant – Whether appellant was liable for breaching terms of collateral contract

Facts: The High Court (Baker J), following judgment delivered on the 23rd March, 2018, by order dated the 20th April, 2018, awarded the plaintiff/respondent, Mr Begley, €59,289.26 in damages against the first and second defendants, Damesfield Ltd and Mr Lally. The second defendant (the appellant) appealed to the Court of Appeal against that order. The appellant filed a notice of appeal reciting eight substantive grounds. In oral submissions, these issues were narrowed down. The issues turn on the finding by the trial judge that the appellant was liable for breaching the terms of the collateral contract which arose on the basis of promises or assurances made to the respondent to the effect that the difficulties caused by the rocks would be rectified and which induced him to close the sale of the property. In light of that finding, the appellant submitted that: (a) there was no claim of any such promise or assurances made by the respondent in the case pleaded by him; (b) the evidence adduced by the respondent was not sufficiently cogent to support the existence of collateral contract; and (c) the terms of the collateral contract identified by the trial judge were insufficient to fix the appellant with liability. The respondent identified the issues as being twofold: (a) the trial judge erred in finding the appellant bound by such collateral contract; and (b) that a claim for breach of collateral contract was not adequately pleaded by the respondent against the appellant. The difference between the two approaches was that of sequencing. The respondent’s answer to the pleading point was bound up with the substantive findings of the trial judge. For that reason, Donnelly J agreed that it was better to approach that issue last. She considered that the issues and the order they should be dealt with were as follows: (a) whether the trial judge erred in finding that the evidence supported a collateral contract, in particular between the appellant and respondent; and (b) whether it was open to the trial judge to grant a remedy for a breach of a collateral contracts in these proceedings.

Held by Donnelly J that the trial judge made clear findings of a breach of a collateral contract on the part of the appellant. Donnelly J held that there was evidence before the trial judge which was sufficiently cogent to permit her to make that finding on the evidence. Donnelly J noted that a breach of a collateral contract had never been pleaded, there was no application to amend the pleadings and there were no legal submissions at the end of the evidence squarely addressing the issue. In those circumstances, Donnelly J held that there was a procedural unfairness to the appellant of such significance that it was necessary to allow the appeal.

Donnelly J proposed asking the parties for further submissions on the question of whether this issue should be remitted to the High Court for the sole purpose of addressing the issue of collateral contract and, if so, how this might be dealt with in the High Court upon remittal.

Appeal allowed.

JUDGMENT of Ms. Justice Donnelly delivered this 26 ^th day of June, 2020

Introduction

1 Following her judgment delivered on the 23 ^rd March, 2018, by order dated the 20 ^th April, 2018, Baker J. awarded the plaintiff (hereinafter, “the respondent”) €59,289.26 in damages against the first and second named defendants. This is the appeal of the second named defendant (hereinafter, “the appellant”) against that order. The full background to the proceedings is set out in the judgment of the trial judge ( Begley v. Damesfield Ltd [2018] IEHC 221).

2 The respondent brought a claim in respect of two berths at the Jolly Mariner Marina Village, Brick Island, Coulson Road, Athlone, Co Westmeath. The Jolly Mariner Marina Village was a development constructed by the first defendant, Damesfield Ltd. (hereinafter, “Damesfield”) on property owned by the appellant. The appellant was the majority shareholder in, and director of, Damesfield. A company called Lalco Ltd. (hereinafter, “Lalco”), a company in the John Lally Group of companies (a group either owned or controlled at least partially by the appellant), was also involved in the development. The development was an apartment development with adjacent marina. The third defendant, Jolly Management Company Limited (hereinafter, “the management company”) was set up by the appellant and Damesfield to manage the development when completed.

3 In about May 2015, the respondent agreed to purchase two apartments in the development together with marina berths, number 56 and 57. By combined building agreements and contracts for lease dated the 14 ^th October, 2005 between Damesfield and the respondent, Damesfield contracted to construct the berths.

4 Special condition 19(G) of the contract provided that upon completion, leases of each berth would be handed over to the respondent duly signed by the appellant, Damesfield and the management company. Subsequently, by two leases dated the 20 ^th September, 2007 between the appellant, Damesfield, the management company and the respondent, the berths were demised to the respondent for a term of 890 years from the 1 ^st January, 2005 at a nominal rent.

5 After executing the contracts, but prior to their completion, the respondent visited the recently constructed berths and noticed the presence of rocks at the entrance thereto; therefore, the existence of the rocks in the vicinity of the berth were known to him when he entered into the leases. The respondent also gave evidence that he was given to understand by the appellant and Damesfield, that any access problem arising from the rocks would be “sorted out”, and he completed the contracts in reliance on this understanding. The rocks were never removed. The respondent remained unable to navigate and/or moor in either berth and accordingly has received no value at all from the purchase. The finding that the berths were unusable was uncontested.

The Issues on this Appeal

6 The appellant filed a notice of appeal reciting eight substantive grounds. In oral submissions, these issues were narrowed down. The issues turn on the finding by the trial judge that the appellant was liable for breaching the terms of the collateral contract which arose on the basis of promises or assurances made to the respondent to the effect that the difficulties caused by the rocks would be rectified and which induced him to close the sale of the property.

7 In light of that finding, the appellant submitted that: -

a) there was no claim of any such promise or assurances made by the respondent in the case pleaded by him:

b) that the evidence adduced by the respondent was not sufficiently cogent to support the existence of collateral contract: and

c) that the terms of the collateral contract identified by the learned trial judge were insufficient to fix the appellant with liability.

8 The respondent identifies the issues as being twofold:

a) the trial judge erred in finding the appellant bound by such collateral contract: and

b) that a claim for breach of collateral contract was not adequately pleaded by the respondent against the appellant.

9 The obvious difference between the two approaches is that of sequencing. The respondent's answer to the pleading point is bound up with the substantive findings of the trial judge. For that reason, I agree that it is better to approach that issue last. I consider that the issues and the order they should be dealt with are as follows:

a) whether the trial judge erred in finding that the evidence supported a collateral contract, in particular between the appellant and respondent: and

b) whether it was open to the trial judge to grant a remedy for a breach of a collateral contracts in these proceedings.

The High Court Judgment

The claims as pleaded

10 In the course of her judgment. Baker J. disposed of the pleaded claims of the respondent by rejecting them. None of her findings in those respects are at issue. The sole issue is her finding that there was a breach of a collateral contract. The findings of fact and law relevant to that issue will be discussed in detail below. It is nevertheless relevant to the understanding of her decision and of this judgment to record briefly some of the other findings she made.

11 The respondent had claimed that there was an implied term in the contracts for sale and the purchase leases which was necessary to give business efficacy to the contracts and to reflect the common intention of the parties. The implied term was that the berths would be accessible and suitable for the vessels for which they were built. Baker J. held at para. 36 of her judgment that “the contract for sale and the building agreement are to be read as carrying an implication on the part of the vendor and the developer that the berths would be accessible.” The contracts did not close for a period of about 2 years.

12 After signing the contract but prior to entering into the leases, the respondent became aware that access to the berths was not navigable. He gave evidence that he thought the rocks were rubble or bedrock which could be removed without difficulty. In those circumstances, Baker J. said that the respondent must be held to have taken the berths in the condition in which they were in at the time of the closing of the sale. The respondent could not therefore succeed in an argument that there was an implied term in the leases/agreements that the...