Gibbons v Doherty
| Jurisdiction | Ireland |
| Judge | Ms Justice Baker |
| Judgment Date | 30 October 2019 |
| Neutral Citation | [2019] IECA 275 |
| Docket Number | Appeal No. 2014/811 |
| Court | Court of Appeal (Ireland) |
| Date | 30 October 2019 |
[2019] IECA 275
THE COURT OF APPEAL
McGovern J.
Baker J.
Costello J.
Appeal No. 2014/811
AND
Specific performance – Contract for sale – Execution – Appellant seeking specific performance against both respondents – Whether the second respondent had the financial means to complete the sale
Facts: The plaintiff/appellant, Mr Gibbons, appealed to the Court of Appeal from the order of Murphy J made on 19 March 2013 following delivery of a written decision on 14 March 2013 ([2013] IEHC 109), by which he ordered specific performance against the second defendant/respondent, ADT Investments Ltd (the Company), of an agreement executed in writing dated 21 December 2006 and made between Mr Gibbons, as vendor and the first respondent/defendant, Mr Doherty, as purchaser in trust. By implication, the trial judge refused to order specific performance against Mr Doherty. The primary issue for determination arose from the execution by Mr Doherty of the contract for sale in trust and his subsequent nomination of the Company as beneficiary and purchaser. At the date of the contract, the Company had not yet been incorporated. Mr Gibbons argued that he was entitled to specific performance against Mr Doherty and not just against the Company, and he made this assertion for the practical reason that the Company did not have the financial means to complete the sale.
Held by Baker J that General Condition 30 of the Law Society General Conditions of Sale, 2001 Edition permits a person who has expressly signed a memorandum of sale in trust or as agent, or using a similar formula, to nominate his principal or beneficiary. Baker J held that the General Condition does not provide in its express language that the principal or beneficiary must be in existence at the time of the contract but sets in place a structure capable of being availed of by a party who signs in a representative capacity to disclose the name of his principal or such other party, and to nominate that person as purchaser. Baker J held that commercial reality often requires a degree of flexibility or confidentiality regarding the identity of a principal and might lead to a desire not to disclose the name of a principal until close to or at the date of completion. Baker J held that the General Condition is permissive to that extent, but may be varied by special condition. Baker J noted that the trial judge found, as a matter of fact, that the contract was entered into on trust and that the trust was accepted by the vendor. Baker J held that Mr Gibbons must be regarded as having accepted that Mr Doherty’s execution of the memorandum of sale in a representative capacity enabled him to avoid personal liability by the nomination of the Company as he duly did. Baker J noted that there was no discussion in the correspondence that the sale be closed by a sub-sale, nor did the completion notice served for the failure to close the contract for the third lot suggest that the vendor had in mind that the deed would be a transfer by way of sub-sale.
Baker J held that the trial judge was correct in his conclusions and that the appeal must fail.
Appeal dismissed.
This appeal concerns the execution by a purchaser of a contract for sale of real property in trust or as agent in the light of the provisions of General Condition 30 of the Law Society General Conditions of Sale, 2001 Edition (the “General Conditions of Sale”).
The appeal is from the order of Murphy J. made on 19 March 2013 following delivery of a written decision on 14 March 2013, Gibbons v. Doherty [2013] IEHC 109, by which he ordered specific performance against the second defendant/respondent, ADT Investments Limited (“the Company”), of an agreement executed in writing dated 21 December 2006 and made between the plaintiff/appellant, Mr Gibbons, as vendor and the first respondent/defendant, Mr Doherty, as purchaser in trust. By implication, the trial judge refused to order specific performance against the first defendant/respondent.
For convenience I propose to refer to the plaintiff/appellant and the first defendant/respondent by their names or, where appropriate, as “purchaser” or “vendor”.
There is relatively little dispute between the parties regarding the factual context and the primary issue for determination arises from the execution by Mr Doherty of the contract for sale in trust and his subsequent nomination of the Company as beneficiary and purchaser. At the date of the contract, the Company had not yet been incorporated.
No issue arises concerning the application of s. 37 of the Companies Act 1963 (now s 45 of the Companies Act 2014) as the parties accept that the section has no application, as the contract was not made expressly by way of a pre-incorporation contract and Mr Doherty did not execute the contract on behalf of a company yet to be incorporated.
The matter is to be determined by reference to the provisions of the General Conditions of Sale, the legal effect of the execution of a contract in trust by a purchaser, and the facts surrounding the nomination of the Company as purchaser.
Mr Gibbons argues that he is entitled to specific performance against Mr Doherty and not just against the Company, and he makes this assertion for the practical reason that the Company does not have the financial means to complete the sale.
By plenary summons issued on 21 May 2009, Mr Gibbons sought an order for specific performance of a contract in writing made on 21 December 2006 for the sale of three plots of land, part of Folios 1984 and 17310F of the Register of Freeholders, County Donegal, comprising 7.93 hectares or thereabouts. He also claims damages for breach of contract in addition to, or in lieu of, specific performance.
The contract for sale made in writing incorporated the General Conditions of Sale and Mr Gibbons thereby agreed to sell to Mr Doherty the folio lands therein described for the total price of €4m and subject to the general and special conditions therein contained. The purchaser Mr Doherty is defined as acting “in trust”.
The sale was agreed to be closed in three lots and the sales of lot 1 and lot 2 were closed without difficulty in accordance with the special conditions in that behalf, which provided for the closing of the first lot within fourteen days after the receipt of loan finance, and of the second lot twelve months thereafter. The purchase price was apportioned as to the first lot in the sum of €2m, and as to lots 2 and 3 in the sum of €1m each. It is in respect of the completion of lot 3 that the claim for specific performance was brought and the Special Conditions provide that completion of that sale was to take place twenty-four calendar months from the date upon which the first completion had taken place. In the event, the sale was therefore agreed to close on or before 29 March 2009.
On 28 February 2007 the solicitors for the purchaser identified the Company as the purchaser, and thereafter raised requisitions on title and furnished a draft deed of transfer on its behalf. The sale of the first two lots closed to the Company by direct sale to the Company and not by sub-sale. The transfer of 29 March 2007 from Mr Gibbons of lot 1 was made to the Company as was that of 24 April 2008 of lot 2. The sale of lot 3 did not close as agreed.
The correspondence from the solicitors for the purchaser thereafter identified the Company as purchaser, and some of the correspondence from the vendor's solicitor did likewise, although I note that the name of another company in which Mr Doherty was personally involved appeared in the heading on correspondence on most, but not all occasions, and that that company was also named as purchaser in correspondence from the solicitors for the purchaser in 2008. I will return below to the argument made on the part of Mr Doherty that the actions of the vendor in treating the Company as purchaser of the two first lots are inconsistent with the case it now makes against Mr Doherty personally and that the vendor is estopped from seeking specific performance against Mr Doherty personally.
By completion notice served pursuant to General Condition 40 of the contract for sale and dated 3 April 2009, the vendor called upon the purchaser to close the sale in respect of lot 3 within 28 days from the service thereof.
The purchaser was identified in the completion notice and in the subject line of the cover letter of 3 April 2009 as “Daniel Doherty in trust for ADT Investments Limited and A.D.T. Investments Limited.” The completion notice had been served after a “without prejudice” letter was sent by the solicitors for the purchaser dated 20 November 2008, in which it was stated that the Company would be unable to proceed to close the sale of lot 3 as the severe downturn in the economy and general banking conditions made it impossible for the Company to obtain finance. It seems from the letter that Mr Gibbons had been informed of this fact at a meeting with Mr Doherty personally some weeks earlier. That letter invited the vendor to vacate the remainder of the agreement and was met some ten days later by the completion notice.
The trial judge, having reviewed the sequence of events, made findings of fact which I now propose to outline. At p 13, under the heading “decision of the court”, the trial judge stated that the first two lots were:
“purchased by the second named defendant without any issue being raised by the vendor.”
The events surrounding the difficulty in obtaining finance to close the purchase of the third lot were described and the trial judge recites the fact that the solicitors for the vendor did not understand that the...
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