Foley v Mangan

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 24 August 2009
• Neutral Citation: [2009] IEHC 404
• Court: High Court
• Date: 24 August 2009

[2009] IEHC 404

THE HIGH COURT

[No. 3559P/2006]

Foley v Mangan

[2009] IEHC 404

BETWEEN

PATRICK FOLEY AND LIAM FOLEY

PLAINTIFFS

AND

SIMON MANGAN

DEFENDANT

CONVEYANCING & LAW OF PROPERTY ACT 1881 S14

LOCAL GOVT (WATER POLLUTION) ACT 1977 S12

LOCAL GOVT (WATER POLLUTION) (AMDT) ACT 1990

EEC DIR 91/676

WYLIE & FARRELL LANDLORD & TENANT LAW 2ED 1998 PARA 24.09

CONVEYANCING & LAW OF PROPERTY ACT 1881 S14(8)

CONVEYANCING & LAW OF PROPERTY ACT 1881 S14(1)

HALSBURYS LAWS OF ENGLAND 4ED VOL 27(1) PARA 345

WYLIE & FARRELL LANDLORD & TENANT LAW 2ED 1998 PARA 24.14

BILLSON v RESIDENTIAL APARTMENTS LTD 1991 3 AER 265 1991 3 WLR 264

CAMPUS & STADIUM IRELAND DEVELOPMENT LTD v DUBLIN WATERWORLD LTD UNREP GILLIGAN 21.3.2006 2006/10/1845 2006 IEHC 200

LAW OF PROPERTY ACT 1925 S146 (UK)

MCILVENNY v MCKEEVER 1931 NI 161 1931 65 ILTR 147

MOFFAT v FRISBY & GOOD 2007 4 IR 572 2007/42/8729 2007 IEHC 140

JONES v CARTER 1846 15 M & W 718 153 ER 1040

GS FASHIONS LTD v B & Q PLC & ORS 1995 4 AER 899 1995 1 WLR 1088

LANDLORD & TENANT LAW AMDT (IRL) ACT 1860 S43

FOOTT v BENN 1884 18 ILTR 90

CROFTER PROPERTIES LTD v GENPORT LTD UNREP MCCRACKEN 15.3.1996 1996/2/526

CONVEYANCING & LAW OF PROPERTY ACT 1881 S14(2)

WYLIE & FARRELL LANDLORD & TENANT LAW 2ED 1998 PARA 24.21

CUE CLUB LTD v NAVARO LTD UNREP SUPREME 23.10.1996 1998/14/5185

HYMAN & ANOR v ROSE 1912 AC 623

BILLSON v RESIDENTIAL APARTMENTS LTD 1992 1 AER 141 1992 1 AC 494 1992 2 WLR 15

LANDLORD AND TENANT

Lease

Contract for sale - Option agreement - Special conditions - Asset sale agreement - Whether lease terminated by forfeiture - Arrears of rent - Underlying transactions - Leaseback - Option to re-purchase - Whether defendant had continuing liability for apportioned rent payable under lease - Whether defendant remained liable for rent - Whether agreed that accrued rent waived or rolled up in new agreement - Notice - Whether valid forfeiture notice served - Whether notice valid or effective - Whether any breach of lease - Whether defendant remedied alleged breach breaches prior to initiation of proceedings - Whether forfeiture waived by conduct - Whether plaintiffs entitled to forfeit lease -Whether defendant entitled to relief against forfeiture - Enforceability of right of forfeiture - Relief against forfeiture - Whether plaintiffs entitled to forfeit lease for breach of covenant - Nature of court's discretion - Billson v Residential Apartments Ltd (No 1) [1991] 3 WLR 264 applied; Campus Stadium Ireland Ltd v Dublin Waterworld [2006] IEHC 200, (Unrep, Gilligan J, 21/3/2006), McIlvenny v McKeever [1931] NI 161, Moffat v Frisby [2007] IEHC 140, [2007] 4 IR 572, Jones v Carter (1846) 15 M & W 718, GS Fashions Ltd v B & Q Plc [1995] 1 WLR 1088, Foott v Benn (1884) 18 ILTR 90, Crofter Properties Ltd v Genport Ltd (Unrep, McCracken J, 15/3/1996), Cue Club Ltd v Navaro Ltd (Unrep, SC, 23/10/1996), Sweeney v Powerscourt Shopping Centre Ltd [1984] IR 501, Hyman v Rose [1912] AC 623 and Billson v Residential Apartments Ltd [1992] 1 AC 494 considered - Conveyancing Act 1881 (44 & 45 Vict, c 43), s 14 - Relief granted (2006/3559P - Laffoy - High - 24/8/2009) [2009] IEHC 404

Foley v Mangan

Facts the defendant had entered into a contract with the plaintiffs for the sale by him to them of agricultural land. That sale was conditional upon the plaintiffs entering into an agreement to lease back the said lands for a term of four years to the defendant, subject to the payment of rent therefor and the defendant making available to the plaintiffs an alternative bank of land for their farming requirements in stead of a portion of that rent. The lease also contained an option, limited in time and exercisable by the defendant, to buy back the land from the plaintiffs subject to the lease not having been forfeit in the relevant period. The plaintiffs sought a declaration that a lease made between them and the defendant had been terminated by forfeiture for breaches of covenants relating to the payment of rent, the prevention of waste and a duty to insure and sought possession together with mesne rates. The defendant, inter alia, applied for relief against forfeiture, contending that the plaintiffs sought to contrive a forfeiture of the lease in the hope of forfeiting the defendant's rights under the option agreement.

Held by Ms Justice Laffoy in granting the defendant relief against forfeiture and making him liable for the costs of the proceedings on a party and party basis that there had been substantial compliance by the defendant with his obligation under the lease to provide suitable land to the plaintiff as payment of rent in kind. Accordingly, the plaintiffs' claim that the lease was forfeited for non-payment of rent failed.

That it would be absurd to construe a covenant in an occupation lease for a term of less than five years of farmland, farm buildings and a farmyard created in the 21st century, under which lessee covenants not to commit or suffer any waste, as not being contravened where the lessee engaged in conduct which resulted in the accumulation and escape of slurry, pollution and contamination, as not damaging the reversion, where the lessor could be faced with proceedings under statutory provisions governing waste management by public authorities and possibly actions in nuisance or negligence by adjoining occupiers, which necessitate the taking of remedial action or the payment of compensation when the lease expires. Accordingly, the conduct of the defendant had the effect of increasing the burden on the reversion and was therefore in breach of the clause of the lease prohibiting the commission or sufferance of waste. No action had been taken by the defendant to remedy that breach prior to the commencement of the proceedings.

The plaintiffs had not waived the forfeiture by their acceptance of rent from the defendant.

That the jurisdiction to grant relief against forfeiture for breach of a covenant other than that to pay rent pursuant to section 14 of the Conveyancing Act 1881 was discretionary in nature and the discretion had to be exercised on the same principles as the general equitable jurisdiction to afford relief which could be invoked in cases of forfeiture for non-payment of rent. One of those factors was that, as the term of the lease had expired in the interim, the grant of relief would be a moot issue and that precluding the defendant from exercising the option to purchase back the land had been a major aspect of the motivation on the part of the plaintiffs in prosecuting the proceedings.

Reporter: P.C.

1 Judgment of Miss Justice Laffoy delivered on the 24th day of August, 2009.

The Proceedings

2 In these proceedings, which were initiated by plenary summons which issued on 28 ^th July, 2006, the plaintiffs claim a declaration that a lease dated 12 ^th October, 2004 (the lease) made between the plaintiffs and the defendant has been terminated by forfeiture. They also claim an order for possession of the lands demised by the lease, together with arrears of rent and mesne rates. The simplicity of the case pleaded by the plaintiffs belies the complex nature of the transactions between the parties, of which the lease was only one element. It is necessary to consider the underlying transactions before considering the case as pleaded.

The underlying transactions

3 The factual background to the underlying transactions is that prior to 2004 both the defendant and the plaintiffs were engaged in farming and grain production in North County Dublin. The plaintiffs were seeking to expand their operations and were looking for suitable lands for that purpose. At the time, the defendant, who owned a farm, which included a grain storage facility, in the Garristown area of North County Dublin, was under financial pressure and was interested in selling the lands. The parties were introduced by a Mr. J. J. Sullivan, who facilitated negotiations between them, the outcome of which was an agreement that the defendant would sell the lands to the plaintiffs, but there would be a lease back in favour of the defendant for a period of four years and nine months and the defendant would also have an option to re-purchase the land during the term of the lease. The composite agreement between the parties was formalised in three documents, namely:

4 (1) a contract for sale dated 1 ^st October, 2004 (the sale contract);

5 (2) the lease; and

6 (3) an option agreement dated 12 ^th October, 2004 (the option agreement).

7 It is necessary to consider the three documents in some detail. The parties had separate legal representation in relation to the composite agreement.

8 The sale contract was in the standard form General Conditions of Sale (2001 Edition) published by the Law Society. By virtue of the sale contract the defendant agreed to sell to the plaintiffs for €4,000,000 certain lands registered on three County Dublin folios, which I will refer to as "the sold lands", which comprised 205 acres. The special conditions in the contract which are of relevance for present purposes are:

9 (a) special condition 12, which was in the following terms:

"This Contract is conditional upon the parties hereto (sic) entering into a four year nine month Letting Agreement with the [defendant] in the terms of the draft Agreement annexed hereto. The commencement date for which shall be the day of closing of this transaction (sic). The granting of the Letting Agreement by the [plaintiffs] shall be conditional upon the [defendant] making available to the [plaintiffs] an alternative bank of land for tillage purposes amounting to no less than 205 acres at a location or locations of the [defendant's] choosing within the vicinity of the property in sale for the duration of the Letting Agreement"

10 and

11 (b) special...