Desmond Murtagh Construction Ltd ((in Receivership)) and Others v Hannan and Others
| Jurisdiction | Ireland |
| Judge | Mr. Justice Kelly |
| Judgment Date | 28 July 2011 |
| Neutral Citation | [2011] IEHC 276 |
| Court | High Court |
| Date | 28 July 2011 |
[2011] IEHC 276
THE HIGH COURT
BETWEEN
AND
JUDGMENT of Mr. Justice Kelly delivered on the 28th day of July, 2011
This is a claim for specific performance of 22 contracts for sale made between the defendants as purchaser and the late Desmond Murtagh (Mr. Murtagh) as vendor dated 30 th November, 2007. Specific performance is also sought of 22 corresponding building agreements, made between the defendants, as employer and Desmond Murtagh Construction Limited (the Company) as contractor. All of these contracts were dated 30 th November, 2007 and their subject matter were units 4, 7, 8, 10, 21, 24, 27, 30, 31, 32, 35, 36, 53, 54, 55, 56, 57, 58, 67, 68, 69 and 70 Castlemanor, Billis, Drumalee, Co. Cavan. The unit price for each unit was €82,000 which was payable together with the sum of €188,000 on foot of the building contract for each unit. Thus, there is an alleged total of €1,804,000 payable to the estate of Mr. Murtagh, deceased, for the sale of the units and a sum of €4,136,000 payable to the Company on foot of the building agreements for the construction of those units.
The contracts in suit represent the balance of an original 48 contracts for the purchase of the entire Castlemanor villas, such other contracts having already been completed.
ACC Bank Plc appointed Kieran Wallace as receiver of the Company on 11 th February, 2009.
Mr. Murtagh died on 5 th June, 2009. Probate to his estate was extracted on 18 th January, 2010, by his brother and sister who are the executors named in his Will. Mr. Murtagh's personal representatives authorised Mr. Wallace to make all decisions as might be required in respect of these proceedings.
The first defendant (Mr. Hannan) lived in Cavan for 32 years where he was manager of the ACC Bank. All of the other defendants were customers of that bank. In 2002, they formed a partnership which got involved in property purchase and development. It was known as the Hammo Partnership. The present case arises out of one of the partnership's ventures into property speculation and development.
In short, the Hammo Partnership purchased lands at Billis, Co. Cavan in 2005. The purchase price was €1.7m. Between that purchase price, the paying off of a Mr. Leddy who introduced them to the land and the obtaining of planning permission, the total expenditure which the Hammo Partnership made on these lands was of the order of €3m. Two years after its purchase, it put the lands on sale seeking €9m for it. That price was not achieved but the late Mr. Murtagh paid the partnership €7m for the land.
Not content with having more than doubled their money, the defendants, as members of the Hammo Partnership, sought to derive further fiscal benefits by entering into arrangements details of which I will examine presently. These arrangements were driven by tax avoidance motives.
The contract under which Mr. Murtagh purchased the Billis lands was dated 8 th January, 2007. Mr. Murtagh and the Company constructed a residential retirement complex known as Castlemanor Retirement Village on the lands.
By two further contracts which were also dated 8 th January, 2007, it was agreed that the defendants would purchase back a total of 48 units when constructed in the development and that the Company would construct those units.
Subsequently, having regard to tax advice which was given to the defendants, these two composite contracts were replaced by individual contracts pertaining to each of the 48 units. All of these contracts bear the same date namely 30 th November, 2007. Each of the 48 contracts comprised an individual contract for sale of the land by Mr. Murtagh to the defendants and a corresponding building agreement in which the Company was the contractor and the defendants the employer.
The closing dates in respect of the units which are in suit were as follows. Units 4, 7, 8, 10 and 35 had a closing date of 31 st March, 2008. Units 21, 24, 27, 30, 31, 32 and 36 had a closing dated of 30 th June, 2008. Units 53, 54, 55, 56, 57, 58, 59, 67, 68, 69 and 70 had a closing date of 31 stOctober, 2008.
At the time when the contracts in suit were executed, the building work on the retirement village was far advanced and indeed was proceeding with speed. This was because the works had to be completed by a specific date in order to avail of the tax advantages. Despite the speed of the works, all parties agree that Mr. Murtagh was a good and competent builder and the work done by him and the Company was of a high standard.
When the original contracts of 8 th January, 2007, regulated the relationship between the parties, it was agreed that the defendants would provide a €1,500,000 bond in respect of a deposit for the contract for sale and building agreement. That bond was to remain in place until the sales of all 48 units in the development closed.
On 8 th March, 2007, a guarantee was executed between National Irish Bank Limited, the lending bank of the defendants and ACC Bank Plc, the lending bank of the Company and Mr. Murtagh. That instrument provided that in consideration of ACC Bank affording facilities to Mr. Murtagh, National Irish Bank guaranteed the payment on demand of a total sum of €1,500,000 provided that that demand could only be made by ACC Bank in the event that Mr. Murtagh had not paid that sum. This was a continuing guarantee which could be terminated by National Irish Bank on giving 90 days notice in writing to ACC Bank. This arrangement was arrived at between the parties and this bond acted as a substitute for the composite deposit monies due on foot of the contracts for sale and the building agreements.
When the 48 individual contracts of 30 th November, 2007, replaced the earlier two contracts of January 2007, exchange of the individual contracts was carried out on the basis of that bond remaining in place in respect of the deposit for the 48 units.
For the sake of completeness, I ought to record that on 20 th October, 2008, ACC Bank plc. demanded payment from National Irish Bank Limited of this sum of €1,500,000. The defendants through their solicitors P.J.F. McDwyer and Company by letter dated 24 th October, 2008, instructed National Irish Bank that payment was not to be made on foot of the bond because "the amounts due and referred to in the said guarantee have already been discharged and paid to the A CC Bank Plc by Desmond Murtagh and therefore this guarantee has been satisfied in full".
Between December 2007 and the summer of 2008, 26 sales of the 48 units were completed. All 48 houses were substantially completed. The completion dates were staggered as indeed is the case in relation to the units which are in suit.
By July 2008, the plaintiffs were of the view that the defendants had become reluctant to close the remaining sales and so a completion notice was served dated 14 th July, 2008, in respect of such of the units whose closing date had passed at that time.
The defendants contended that these completion notices were invalid because of an alleged agreement to withdraw the contracts in respect of which they were served and to replace them by other contracts. That contention had no substance, was disputed by the plaintiffs and was never pursued.
Further completion notices were served on 4 th November, 2008.
In December 2008, controversy erupted on issues pertinent to the bond and the receiver was appointed to the Company in February 2009.
I mention these matters because throughout these various controversies no issue was raised by the defendants concerning any aspect of the planning permission granted in respect of the development or compliance with it.
In the light of the defences raised in this action and my findings later in this judgment, that is a matter of some significance.
Whilst a number of planning permissions were granted in respect of the development, the one which is pertinent to this case is that bearing register No. 05/162 dated 13 th October, 2005.
The applicant for the permission was the fourth defendant (Mr. Olwill).
The permission was subject to 54 conditions, only a small number of which have any relevance to this case.
Condition No. 2 required the developer to make a contribution to the planning authority towards expenditure to be incurred by it in respect of public infrastructure and facilities benefiting development in the area of the authority. The sum specified was €296,220. That amount was discharged as the development went along and a balance remains due to Cavan County Council which the receiver of the Company has undertaken to pay. He is in funds to do so.
Condition No. 3 required the developer to lodge with Cavan County Council, a cash deposit or bond of an insurance company or other security to secure the provision and satisfactory completion of roads, footpaths, public lighting etc. The amount specified was the sum of €2,000 per unit. That bond was lodged and was called by Cavan County Council.
Condition No. 14 provided that the dwellings "may not be occupied until the new sanitary facilities have been constructed and tested in accordance with the Council's requirements".
It is condition 33 which has given rise to much of the controversy that I have...
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Desmond Murtagh Construction Ltd ((in Receivership)) & others v Hannaan & others
...out on the basis that such bond would remain alive, unaltered, and in place. 10 The High Court Judge sets out at p. 6 of his judgment ( [2011] IEHC 276) what occurred when on the 20th October, 2008, ACC Bank called in this guarantee. Apparently the defendants, through their solicitor's lett......