Donegan v Kenny

• Jurisdiction: Ireland
• Judge: Mr. Justice Robert Haughton
• Judgment Date: 08 April 2020
• Neutral Citation: [2020] IECA 90
• Date: 08 April 2020
• Court: Court of Appeal (Ireland)
• Docket Number: Record Number: 2018/000457

BETWEEN/

DES DONEGAN, ALAN O'CONNELL

AND

JAMES DORAN

PLAINTIFFS/RESPONDENTS

AND

DENIS KENNY

DEFENDANT/APPELLANT

[2020] IECA 90

Haughton J.

Murray J.

Collins J.

Record Number: 2018/000457

High Court Record Number: 2016/7487P

THE COURT OF APPEAL

CIVIL

Specific performance – Recovery – Damages – Applicant seeking to appeal from the judgment and order of the High Court in specific performance proceedings – Whether the respondents took reasonable steps to minimise their losses in the resale of the property

Facts: The defendant/appellant, Mr Kenny, appealed to the Court of Appeal from the judgment of Twomey J delivered on 31 October 2018, and his order dated 7 November 2018 (perfected 8 November 2018) in specific performance proceedings where the appellant failed to complete a purchase and ultimately the subject property was resold by the plaintiff/respondent vendors, Mr Donegan, Mr O’Connell and Mr Doran, at a lower price. The High Court ordered recovery by the respondents against the appellant of a sum of €248,871 by way of damages and interest. Although a number of issues were raised in the appeal, of central importance were two issues: (1) whether the respondents took reasonable steps to minimise their losses in the resale of the property; and (2) whether the trial judge was correct in his use of the interest rate of 10% stipulated in the contract of sale as the “metric” for assessing damages arising from the delay in receiving the proceeds of sale occasioned by the necessity to resale.

Held by Haughton J that, by reference to the order of the High Court, he would order as follows: (1) he would vacate the declaration made “(d) that the rate of 10% interest is applicable to the Contract for Sale for the period between the date that the Contract for Sale should have closed up until the Contract for Sale actually closed with the third party” and would substitute therefor the following declaration - “(d) that in addition to the sums to which the Plaintiffs are entitled by virtue of Condition 41(a) the Plaintiffs are entitled to recover as actual loss the interest that accrued in respect of the relevant borrowing from AIB for the period of 454 days from 17 June 2016 when the Contract for Sale should have closed to 13 September 2017 when the Contract for Sale with the third party actually closed as damages for breach of contract”; (2) in all other respects he would affirm the declarations made in the High Court; (3) he would vacate the order that the plaintiffs do recover as part of the damages “(2) Interest in the amount of €171,151.40, being interest at the rate of 10% per annum on the amount of the agreed sales price not received by the Plaintiffs on the agreed closing date (the sum of €1.376 million) for the period prior to the completion of the sale (i.e. being the period from 17th June 2016 – 13th September 2017, a total of 454 days)” and he would substitute therefor “(2) The actual interest that accrued in respect of the relevant borrowing by the Plaintiffs from AIB for the period of 454 days from 17 June 2016 when the Contract for Sale should have closed to 13 September 2017 when the Contract for Sale with the third party actually closed, in such sum as maybe agreed or in default of agreement as be ascertained by the Court”; (4) consequently he would delete the words “in the sum of €248,871.27” from that part of the order that reads “IT IS HEREBY ORDERED that the Plaintiffs do recover from the Second Named Defendant damages in the sum of €248,871.27 made up as follows:”; (5) he would affirm the orders at (1) and (3) for recovery by the plaintiffs of the sums €76,000 and €1,719.87 respectively.

Haughton J held that he would postpone making any orders in respect of costs in the High Court or the Court of Appeal pending hearing further argument.

Appeal allowed in part.

JUDGMENT of Mr. Justice Robert Haughton delivered on the 8th day of April 2020

Introduction

1 This is an appeal from the judgment of Twomey J. delivered on 31 October 2018. and his order dated 7 November 2018 (perfected 8 November 2018) in specific performance proceedings where the appellant failed to complete a purchase and ultimately the subject property was resold by the respondent vendors at a lower price. The High Court ordered recovery by the respondents against the appellant of a sum of €248.871 by way of damages and interest. Although a number of issues are raised in the appeal, of central importance are two issues: (1) whether the respondents took reasonable steps to minimise their losses in the resale of the property, and (2) whether the trial judge was correct in his use of the interest rate of 10% stipulated in the contract of sale as the “metric” for assessing damages arising from the delay in receiving the proceeds of sale occasioned by the necessity to resale.

Background

2 By Agreement for Sale dated 20 May 2016 (the “Contract”) the respondents agreed to sell, and the appellant agreed to purchase Block 20A. Beckett Way. Park West Business Park. Gallanstown. Dublin 12 (“the Property”) at a price of €1.450.000 (“agreed sale price”). The Contract was signed by the appellant, albeit that it listed a Mr. Barry Cogan as the purchaser. The Closing Date was to be “four weeks from the date hereof” i.e., 17 June 2016. The Interest Rate stipulated under the Contract on page 2 was 10% per annum. The deposit, originally intended to be €145.000. was reduced to €74.000. The Law Society General Conditions of Sale (2009 Edition) applied to the sale.

3 Special condition 8 provided –

“8. Mortgage

The property in sale is charged to AIB bank Plc. On or prior to completion the Vendors' solicitor shall furnish the Purchaser's solicitor a letter from AIB bank confirming the proceeds that they require in order to release the property in sale from its security. The Vendors' solicitor shall undertake to discharge the charges over the said property out of the proceeds of sale and to furnish the Purchaser's solicitor with evidence of eDischarges or alternatively a vacates or vacated charges as soon as same comes to hand after completion.”

4 The appellant failed to complete the purchase on the agreed closing date, and a Completion Notice was issued on 20 June 2016 by the respondents' solicitors. The time for completion was further extended by agreement beyond this date, and ultimately on 31 August 2016. the respondents extended the closing date for an additional two-week period which expired on 14 September 2016.

The proceedings and resale

5 These proceedings were initiated by Plenary Summons issued on 17 August 2016. seeking specific performance of the Contract, and/or damages in lieu of specific performance. The case was entered into the Commercial Court on 5 December 2016.

6 Subsequently, as the sale was never completed, the deposit of €74,000 was forfeited by the respondents under General Condition 41(a). and the Property was subsequently resold by them to an unrelated third party, Trinitymount Limited (“Trinitymount”) for a sum of €1,300.000. That sale was agreed on 30 August 2017 and closed on 13 September 2017.

7 These proceedings thereafter were amended and continued as a claim for damages for breach of contract and a declaration that the respondents were entitled to retain the deposit for their own use. In addition to retention of the deposit the respondents claimed: -

(A) €76.000 calculated as the shortfall between the agreed sale price (€1.45M) and the resale price (€1.3M), being €150,000 less the forfeited deposit of €74,000 giving a net figure of €76,000.

(B) Interest of 10% on the said sum of €76,000.

(C) By way of damages, interest at 10% on the amount of the agreed sale price not received by the plaintiffs on the closing date – in the sum of €1.376M – for the period of delay from the closing date of 20 June 2016 up to completion of the resale on 13 September 2017 (a figure calculated to be €171,151.40).

(D) Additional costs allegedly incurred by the respondents as a result of the delay in closing between June 2016 and September 2017 made up of rates (€4.267.24), insurance (€2.131.51) and a service charge (€8.016.47), making a total of €14.415.22

This last head of claim was not allowed by the trial judge on the basis that during the period of delay, the vendor had the benefit of rent from the property and to award such sums would be to put the vendors in a better position, than if the appellant had performed the Contract and amount to double compensation. This element of the decision is not the subject matter of any cross-appeal.

8 The matter was heard in the High Court on 16 October 2018 and 26 October 2018. The appellant appeared in person.. Three witnesses were called for the plaintiffs – the first named respondent Mr. Donegan. Mr. Milan Schuster, a solicitor in Adams Law the firm representing the respondents, and Mr. Pat Riney, a valuer in Orchard Real Estate Alliance, retained by the respondents both in respect of the original sale and on the resale. While this court did not have the benefit of Transcripts, it did have copies of the Witness Statements of these three witnesses, and counsel for the respondent confirmed that these witness statements were adopted as part of then evidence by each of these witnesses. The appellant did not disagree with that statement.

9 The High Court had to deal with a number of defences that do not arise on this appeal. The defences raised by the appellant that are germane to the appeal are succinctly set out in para. 10 of the judgment: -

“10… He also claims that for the plaintiffs to recover the difference between the Actual Sale Price and the Agreed Sale Price, the Property should have been sold within 12 months of the Agreed Closing Date of 17th June. 2016. as required by Condition 41(a) of the Contract, which he says did not occur. He also claims that the interest rate of 10% under the Contract, which the plaintiffs are...