Donegan v O'Regan T/A Tom O'Regan and Company Solicitors
| Jurisdiction | Ireland |
| Judge | Mr. Justice Twomey |
| Judgment Date | 31 October 2018 |
| Neutral Citation | [2018] IEHC 617 |
| Docket Number | [RECORD NO. 2016/7487 P] |
| Court | High Court |
| Date | 31 October 2018 |
[2018] IEHC 617
THE HIGH COURT
COMMERCIAL
Twomey J.
[RECORD NO. 2016/7487 P]
AND
AND
Damages – Contract – Rate of interest – Plaintiffs seeking contractual rate of interest of 10% from the intended purchaser as damages for his failure to complete the contract which led to a delayed sale of the property – Whether the terms of the contract applied to the intended purchaser
Facts: The plaintiffs, Mr Donegan, Mr O’Connell and Mr Doran, claimed that they were entitled to the contractual rate of interest of 10% from the intended purchaser as damages for his failure to complete the contract which led to a delayed sale of the property, albeit with a third-party purchaser. This case also considered the fact that Condition 41(a) of the Law Society’s General Conditions for Sale expressly provides that if, as a result of an intended purchaser’s failure to complete the purchase of a property that he had contracted to buy, the property is subsequently re-sold to someone other than the intended purchaser, then the vendor is entitled to recover the deficiency from the intended purchaser on the re-sale, if the re-sale takes place within a year of the closing date agreed by the intended purchaser. In this case the re-sale was alleged to have taken place outside that one-year period and so it was argued that there was no entitlement on the part of the vendors to recover the deficiency.
Held by the High Court (Twomey J) that the terms of the contract, and therefore the contractual rate of interest of 10%, did not apply to the intended purchaser, since there was no delayed completion with him under the terms of his contract, the rate of 10% as the interest rate agreed between the parties where there was a delayed completion of the sale (albeit if the sale had completed late with the intended purchaser and not with a third party), was nonetheless the appropriate metric for the Court to use in the assessment of the amount of damages due to the vendor for the failure of the intended purchaser to complete the sale, which failure led to a later sale to a third party and thus the delayed sale of the property. The Court found that, despite the language of Condition 41(a), which refers only to the right of the vendors to recover the deficiency where a re-sale takes place within one year, the right to recover the deficiency also applies if the sale takes place outside that period under the general law applicable to damages for breach of contract.
Twomey J held that the total in damages due to the plaintiffs was made up of the shortfall of €76,000, plus interest at the rate of 10% on the amount of the Agreed Sale Price not received by the plaintiffs on the Agreed Closing Date (the sum of €1.376 million) for the period of delay in the completion of the sale (i.e. interest of €171,151.40), combined with interest of 2% on the shortfall of €76,000 for the period of delay in the second defendant, Mr Kenny, paying that shortfall (interest of €1,719.87), but not the sum of €14,415.22 (in claimed Property expenses); this led to a total award of €248,871.27.
Relief granted.
It is standard under the Law Society's General Conditions of Sale in contracts for the sale of land for there to be an interest rate applicable to any delays in the purchaser complying with the agreed closing date, so that he will pay interest on the purchase price for the period between the closing date agreed by him and the date on which the actual closing takes place.
The issue that arises in this case, is what happens when the original purchaser breaches the contract and fails to complete the sale and the property is sold to an unrelated third party at a later date. Does the rate of interest, in this case 10%, for the delayed completion by an intended purchaser under his contract for the sale of property apply when that intended purchaser is sued for damages by the vendor?
Under the terms of Condition 25 of the Law Society's Conditions, the interest rate applies to delayed completion by the intended purchaser. However, the completion which occurs in this case is with a third party and it is “delayed” (not under the contract with the third party) but in the sense that it is later than the date in the contract with the intended purchaser. The plaintiffs in this case say they are entitled to the contractual rate of interest of 10% from the intended purchaser as damages for his failure to complete the contract which led to a delayed sale of the property, albeit with a third-party purchaser. For the reasons set out below, this Court finds that the terms of the contract, and therefore the contractual rate of interest of 10%, do not apply to the intended purchaser, since there was no delayed completion with him under the terms of his contract, the rate of 10% as the interest rate agreed between the parties where there is a delayed completion of the sale ( albeit if the sale had completed late with the intended purchaser and not with a third party), is nonetheless the appropriate metric for this Court to use in the assessment of the amount of damages due to the vendor for the failure of the intended purchaser to complete the sale, which failure led to a later sale to a third party and thus the delayed sale of the property.
This case also considers the fact that Condition 41(a) of the Law Society's General Conditions for Sale expressly provides that if, as a result of an intended purchaser's failure to complete the purchase of a property that he had contracted to buy, the property is subsequently re-sold to someone other than the intended purchaser, then the vendor is entitled to recover the deficiency from the intended purchaser on the re-sale, if the re-sale takes place within a year of the closing date agreed by the intended purchaser. In this case the re-sale is alleged to have taken place outside that one-year period and so it is argued that there is no entitlement on the part of the vendors to recover the deficiency. For the reasons set out below, this Court finds that, despite the language of Condition 41(a), which refers only to the right of the vendors to recover the deficiency where a re-sale takes place within one year, the right to recover the deficiency also applies if the sale takes place outside that period under the general law applicable to damages for breach of contract.
This case concerns a claim for damages by the plaintiffs, Messrs Donegan, O'Connell and Doran, arising from an alleged breach of contract by the defendant (‘Mr. Kenny’) as a result of his failure to complete the purchase of a property (the ‘Property’) known as Block 20a, Beckett Way, Parkwest Business Park, Gallanstown, Dublin 12 at a purchase price of €1,450,000 (‘Agreed Sale Price’). The contract for sale (the ‘Contract’) was dated 20th May, 2016 and was signed by Mr. Kenny, albeit that it listed Mr. Barry Cogan as the purchaser. The closing date under the Contract was 17th June, 2016, (the ‘Agreed Closing Date.’)
As Mr. Kenny failed to complete the purchase of the Property on the Agreed Closing Date, a Completion Notice was issued on 20th June, 2016 by the plaintiffs” solicitors. The sale was never completed by Mr. Kenny and the deposit of €74,000, which had been paid in respect of the Property, was forfeited by the plaintiffs. Since the deposit was €74,000, the plaintiffs were due to receive €1,376,000 on the Agreed Closing Date (i.e. €1,450,000 less €74,000.)
As a result of the failure of Mr. Kenny to purchase the property, the property was subsequently sold by the plaintiffs to an unrelated third party, Trinitymount Limited, for the sum of €1,300,000 (‘Actual Sale Price’) on the 13th September, 2017 the (‘Actual Closing Date.’)
It is relevant to note that, initially, the plaintiffs sought specific performance of the Contract against Mr. Kenny and it is for this reason that this case was entered into the Commercial Court on 23rd November, 2016 as a case involving specific performance of a contract worth €1.45 million. However, as a result of the subsequent sale of the Property to Trinitymount Limited, it is no longer a specific performance case, but is now a case involving a claim for damages by the plaintiffs against Mr. Kenny for the loss occasioned to them by Mr. Kenny's alleged breach of the Contract.
The plaintiffs claim damages from Mr. Kenny, in the sum of €76,000, plus interest and costs. This is because €76,000 is the difference between the Agreed Sale Price with Mr. Kenny (€1.45 million), and the Actual Sale Price of the Property (€1.3 million), being the sum of €150,000 less the forfeited deposit of €74,000, giving a net figure of €76,000.
The key defences put forward to these proceedings by Mr. Kenny, who was unrepresented, was that the Contract, although signed by him, was in the name of Mr. Cogan. 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 seeking on the sum of €1.45 million (but this Court calculates should be €1,376,000 once account is taken of the deposit) for the one year and three month delay between the Agreed Closing Date and the Actual Closing Date (and the same rate of 10% on the shortfall of €76,000 thereafter), is not enforceable as he says it is an unconscionable rate of interest.
For their part, the plaintiffs claim that the interest rate under the Contract is 10% and, as such, they...
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