Drocarne Ltd v Seamus Murphy Properties & Developments Ltd
| Jurisdiction | Ireland |
| Judge | Ms. Justice Finlay Geoghegan |
| Judgment Date | 17 April 2008 |
| Neutral Citation | [2008] IEHC 99 |
| Docket Number | No. 1357 P/2006 |
| Court | High Court |
| Date | 17 April 2008 |
BETWEEN
AND
[2008] IEHC 99
THE HIGH COURT
Contract - Specific performance - Frustration - Alleged breach of contract - Whether agreement terminated by reason of frustration
Facts: The plaintiff and the defendant entered into the Master Development Agreement (“MDA”) for the development of lands in accordance with the terms and conditions set out therein. The plaintiff commenced proceedings seeking specific performance of the MDA and/ or damages. The defendant alleged inter alia that the plaintiff breached the terms of the MDA by failing to lodge an application for planning permission for the overall scheme. The defendant also contended that the MDA had been discharged by application of the doctrine of frustration.
Held by Finlay Geoghegan J. in making an order for specific performance that the MDA remained in force between the parties. The plaintiff was not in breach of its obligations in failing to lodge a planning application for planning permission. The MDA did not terminate by reason of frustration.
Reporter: R.W.
CHITTY ON CONTRACTS VOL 1 GENERAL PRICIPLES 29ED 2004 1311 PARA 23.001
NEVILLE & SONS LTD v GUARDIAN BUILDERS LTD 1995 1 ILRM 1 1994/12/3725
TREITEL FRUSTRATION & FORCE MAJEURE 2ED 2004 67 PARA 2.046
NATIONAL CARRIERS v PANALPINA LTD 1981 AC 675
ADMIRAL SHIPPING CO v WEIDNER HOPKINS & CO 1916 1 KB 429
The plaintiff is a company owned as to two-thirds by Treasury Holdings, the developer, and as to one-third by Mr. Dermod Dwyer.
The defendant is a company owned by Mr. Seamus Murphy. Mr. Murphy is a successful businessman with extensive interests in lands in north County Dublin, and Counties Meath and Louth. His particular expertise appears to be in taking options over lands zoned for agricultural use and when rezoned, selling them on at a profit for development. By late 1999, the defendant had options over lands both to the west and east of the then proposed route of the M1 at a proposed interchange at Tullyallen Co. Louth.
Mr. Dwyer and Mr. Murphy were both clients of Mr. Louis Healy of Gore & Grimes, solicitors. They were introduced to each other in late 1999 or early 2000. Negotiations commenced in relation to a joint venture for the development of lands over which the defendant had options at Tullyallen ("the Tullyallen lands").
Negotiations continued throughout 2000. Mr. Ronan and Mr. Barrett of Treasury Holdings, in addition to Mr. Dwyer, were involved for the plaintiff and for the defendant, in addition to Mr. Murphy, Ms. Patricia Rooney, who is the chief executive of the defendant and also Mr. Murphy's partner in life. The plaintiff was advised and assisted by Messrs. Arthur Cox, solicitors, and the defendant by Gore & Grimes, solicitors. On 21st December, 2000, the plaintiff and defendant entered into the Master Development Agreement (the "MDA"). The MDA seeks to provide for the development of the Tullyallen lands in accordance with the terms and conditions set out therein.
In December, 2000, the Tullyallen lands remained zoned for agricultural use. Louth County Council had initiated two relevant planning reviews. The development of the Tullyallen lands was dependent upon a rezoning of the Tullyallen lands. This in turn was dependent upon a variation to the Louth County Development Plan and adoption of an Area Action Plan for the north Drogheda environs.
The Tullyallen lands were not rezoned until July, 2004 following the adoption of the Area Action Plan. A new Louth County Development Plan was finalised in 2003. This was later than anticipated in December, 2000.
On 11th January, 2006, the defendant indicated that it considered the MDA to be at an end and that it was no longer bound by the terms of same.
On 24th March, 2006, the plaintiff commenced these proceedings seeking specific performance of the MDA and/or damages.
The defence to the plaintiff's claim as pleaded was materially different in certain important respects to that pursued to the end of the hearing. The defendant pleaded that the plaintiff was not entitled to specific performance because, inter alia, it acted in fundamental breach of the MDA. Particulars of such fundamental breach were delivered on 14th November, 2006. Those particulars were of alleged failures by the plaintiff to take steps required by clauses 8.1 and 8.3 of the MDA all of which ought to have been taken, it was contended, long prior to January, 2005.They did not include any alleged breach of clause 8.4 of the MDA.
The defendant maintained such a defence up to and including the commencement of the trial. However, in the course of the hearing, counsel for the defendant informed the Court that it was no longer relying upon any alleged breach of the MDA prior to January, 2005. Further, Counsel for the defendant indicated, in response to clarification sought by the Court that the defendant was now contending that as of January, 2005, the MDA was alive and well and the plaintiff would have been entitled to an order for specific performance as of that date.
The departure from the pleadings was not only on the defendant's part. In the statement of claim delivered on 14th July, 2006, the plaintiff pleaded that it used it's best endeavours to comply with the terms of the MDA but that it had not been possible to progress the development in accordance with the timescales laid down, by reason of facts outside of the party's control. At the hearing it contended that the obligation to use best endeavours was not a general obligation but was confined, by clause 7.1, to the achievement of certain objectives by Key Dates. This became of little importance as the plaintiff was not relying on any alleged breach prior to January, 2005.
The defence pursued on behalf of the defendant is that the plaintiff is not entitled to an order for specific performance by reason of one or more of the following:
(i) The plaintiff, as the person seeking an order for specific performance of the MDA, must satisfy the Court that it has complied with the material terms of the MDA. The defendant contends that as the plaintiff has not complied with a material term of the MDA, it is not entitled to specific performance. The alleged breach of the MDA since January, 2005 is in not applying for planning permission for the Overall Scheme Plan deemed to have been approved in January, 2005 in breach of clause 8.4.
(ii) The plaintiff treated the MDA as discharged or at an end following the decision of An Bord Pleanála in relation to the factory retail outlet at Ballymascanlon and is now estopped from denying that it is at an end.
(iii) The MDA was discharged in March, 2005 by application of the doctrine of frustration by reason of the decision of An Bord Pleanála to uphold the planning permission granted for the retail factory outlet at Ballymascanlon.
The particular breach of clause 8.4 of the MDA now relied upon was not pleaded or particularised by the defendant. Nevertheless, it did not appear that there was any specific prejudice to the plaintiff in my permitting the defendant to rely on it as part of the defence as there is no factual dispute that a planning application was not submitted and there is no dispute as to why this occurred. The resolution of the issue primarily depends upon the proper construction of the MDA. As will appear, there is one factual issue relevant to this defence and the frustration relied upon where the plaintiff (by agreement of the defendant) was given permission to put part of the Louth County Council Development Plan 2003 into evidence after the formal end of the evidence in the proceedings.
The issues raised by the plaintiff's claim and the above defences include disputes as to the proper construction of certain clauses of the MDA and in particular clauses 8.3, 8.4 and 28. These, and the remaining issues, have to be considered in the context of the entire of the MDA and what had or had not taken place prior to January, 2005. Notwithstanding that the defendant is no longer contending that the plaintiff was in breach of the MDA in January, 2005, the then factual matrix in which both parties now consider the MDA to have been subsisting is relevant.
The MDA is in essence an agreement to develop the lands over which the defendant then held options at Tullyallen. The bones of the scheme as provided by the MDA are:
(i) The plaintiff brings to the MDA its expertise as a developer (Recital B).
(ii) The defendant brings to the MDA the lands over which it then held options (Recital A and Appendix 1).
(iii) The joint objective of the parties is "to implement the development of the Scheme in accordance with the Overall Scheme Plan in order to maximise the return therefrom having regard to all the circumstances prevailing from time to time during the currency of this Agreement" (clause 2.1).
(iv) The separate objective of the defendant is "to secure in the disposal of each Unit Site by means of the Ground Lease at a Ground Rent . ." (clause 2.2). This was stated to be the securing of an income stream to the defendant by the granting of ground leases. . The MDA provides for an Agreed Percentage of 17.5% of rents to the defendant.
(v) The separate objective of the plaintiff may be summarised as providing and maintaining a high class development and maximising the return to it thereon (clause 2.3).
(vi) The development in planning and design stage is at the plaintiff's expense (clause 8) as it is in the construction phase subject to an agreed contribution not...
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