Ferguson v Merchant Banking Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Murphy
• Judgment Date: 01 January 1993
• Neutral Citation: 1992 WJSC-HC 2020
• Docket Number: No. 10930P/1986,[1986 No. 10930P]
• Court: High Court
• Date: 01 January 1993

1992 WJSC-HC 2020

THE HIGH COURT

No. 10930P/1986

FERGUSON v. MERCHANT BANKING LTD

BETWEEN

JOHN O. FERGUSON

PLAINTIFF

AND

MERCHANT BANKING LIMITED

DEFENDANTS

Citations:

IRISH LIFE ASSURANCE CO LTD V DUBLIN LAND SECURITIES 1986 IR 332, 1989 IR 235

RIVERLATE PROPERTIES LTD V PAUL 1975 CH 133

MESPIL LTD & ANOR V CAPALDI & ORS 1986 ILRM 373

MAGEE & PENNINE INSURANCE CO LTD 1969 2 AER 891

DORE V STEPHENSON UNREP KENNY 24.4.80 1981/4/472

Synopsis:

CONTRACT

Rectification

Rescission - Error - Land - Sale - Parcel - Inclusion - Unilateral mistake of vendor - Certain parcels excluded expressly - Vendor unaware of existence of disputed parcel - Purchaser not at fault - (1986/10930 P - Murphy J. - 7/5/92) - [1993] 3 I.R. 382

|Ferguson v. Merchant Banking Ltd.|

MISTAKE

Contract

Land - Sale - Parcel - Inclusion - Vendor's error - Purchaser not at fault - Vendor unaware of existence of parcel included - Unilateral error of vendor - (1986/10930 P - Murphy J. - 7/5/92)

|Ferguson v. Merchant Banking Ltd.|

SALE OF LAND

Contract

Rescission - Rectification - Parcel - Inclusion - Vendor's error - Purchaser not at fault - Vendor unaware of existence of parcel included - Unilateral error of vendor - (1986/10930 P - Murphy J. - 7/5/92) - [1993] 3 I.R. 382 - [1993] ILRM 136

|Ferguson v. Merchant Banking Ltd.|

1 Judgment of Mr. Justice Murphy delivered the 7th day of May 1992 .

2 In this case the Plaintiff claims specific performance of a contract in writing made in the month of September 1984 between the Defendants of the one part and the Plaintiff of the other part. Under that contract the Defendants agreed to sell for the sum of £38,100 the lands described in the first column of the First Schedule thereto for the estate or in accordance with the title set out opposite such lands in the second column of that Schedule. The lands agreed to be sold were further identified as those "the numbers of which are set out in the Second Schedule with the benefit of the rents reserved by those subleases". As appears from the two Schedules, the lands in question consist of 15 "Building Estates" on which 675 houses had been erected and disposed of by way of lease or sublease on terms that the "Purchaser" paid a ground rent of approximately £20 in respect of each lease. The amount of the annual ground-rent as shown in the Second Schedule to the Contract is £15,298 so that the purchase price represented a multiplier of a little over twice the rent roll. In fact it appeared that all of the estates described in the Contract for Sale had been acquired and developed by companies within what was described as "The Gallagher Group" and Merchant Banking Limited was owned or controlled by the same persons as controlled the Gallagher Group. Apparently it was the practice of the Gallagher Group to sell off the estates as and when developed by them to the Defendants. In this context the evidence was to the effect that the purchase price payable by the Defendant Banking Company was calculated at six times the amount of the annual ground-rent.

3 The Defendant Company (sometimes hereinafter referred to as "the Bank") is being wound up pursuant to an Order of the Court dated the 24th day of May 1982 under which Mr. Patrick J. Shortall was appointed Official Liquidator thereof. Mr. Shortall contests the right of the Plaintiff to have the 1984 contract performed. Mr. Shortall does not dispute the due execution of this document. It would be impossible so to do. Not only is the contract signed by Mr. Shortall but its execution by him was sanctioned by the Order of the Court made on the 19th of September, 1984 in the matter of the winding-up of Merchant Banking Limited. The Bank contends by way of defence and counter-claim that the agreement and consensus between the parties was for the sale by the Bank and the purchase by the Plaintiff of "certain ground-rents" and that it was never the intention of the parties that certain lands (which have been described as "the development lands") and which were delineated on a map annexed to a letter from the Solicitors on behalf of the Bank to the Solicitors on behalf of the Plaintiff dated the 17th of September, 1985 should be included in the sale. The Defendants seek rescission of the contract or alternatively a rectification thereof to give effect to what they say was the true intention of the parties.

4 There is no doubt at all but that the Official Liquidator was directing his mind to the realization and disposal of ground-rents. I accept in full the evidence of Mr. Shortall that this was the case. Indeed, this recollection of the transaction is fully confirmed by all of the contemporaneous documents and in particular the initial advertisment of the property for sale in which it was described as an "Investment Opportunity - Yield 30% Annually".

5 It was argued strenuously by reference to those facts and the purchase price ultimately agreed that the only property of value which the Liquidator intended to sell and the Purchaser expected to acquire were the ground-rents payable out of the various estates.

6 However, the Purchaser - and in fact the Plaintiff was apparently a mere agent or nominee for a Mr. Thomas Anderson - gave evidence of discussions which he had with Messrs. Lombard & Co., the Estate Agents acting on behalf of the Liquidator and with the Liquidator himself in which he says it was agreed that property other than the particular sites out of which the ground-rents issued should be included in the sale. Again, Mr. Shortall fully accepts that this is the case. He is in complete agreement with Mr. Anderson that both parties were in agreement that what was described as various "bits and pieces" were to be included in the sale. The difference between the parties relates to the nature or potential value of those "bits and pieces". The Liquidator was wholly unaware of the one acre or so of "development lands" adjoining or forming part of one of the estates, namely, The Hillcrest Estate, Lucan. It was not until the 1st of July, 1985 that the Receiver appointed over the assets of the Gallagher Group Limited wrote to the Liquidator claiming that on the sale of the ground-rents to the Bank that two parcels of development land had been included in error and that he, the Receiver, was entitled to have them re-transferred to him. Having been alerted by that and subsequent correspondence, the Solicitors on behalf of the Official Liquidator wrote to the Solicitors on behalf of the Purchaser on the 17th of September, 1985 saying:-

"Recently it has come to the attention of our client that in error a significant area of undeveloped land in Lucan comprised in Folio 6300 was included in the contract for sale herein. We enclose herewith a map showing the area in question outlined in red.

As you know, the sale to your client was intended to include ground rental properties and ancillary lands only and not any other substantial undeveloped areas".

7 There is agreement between the parties to the extent that lands - whether they be described as bits and pieces or ancillary and whether valuable or valueless, were to be included above and beyond the property yielding the ground-rents. Indeed, it was Mr. Shortall who explained in his evidence that whilst the subject-matter of the sale was ground-rents, the method of sale was to sell the estate by reference to the Folios comprising the entire estate so as to divest himself of all further responsibility for the estate - a course which would be entirely necessary and proper having regard to the capacity in which he was involved in the transaction. Unfortunately as a result of adopting this procedure there was included in the contract documents a piece of land which does have a significant value and which I accept the Official Liquidator did not intend to include and the existence of which he was unaware. On the other hand I also accept the evidence of Mr. Anderson that he inspected the site and that he was aware that there were undeveloped areas included in the property for sale and that he was hopeful that some of these might be of value. In relation to the disputed site, Mr. Anderson says that he was aware of its existence before the execution of the Contract for...