Gibbons v Doherty
| Jurisdiction | Ireland |
| Judge | Mr. Justice John MacMenamin |
| Judgment Date | 11 December 2020 |
| Neutral Citation | [2020] IESC 72 |
| Court | Supreme Court |
| Docket Number | [RECORD NO.: S:AP:IE:2019:000217] |
| Date | 11 December 2020 |
AND
[2020] IESC 72
Clarke C.J.
O'Donnell J.
MacMenamin J.
Dunne J.
Charleton J.
[RECORD NO.: S:AP:IE:2019:000217]
THE SUPREME COURT
On the 21st December, 2006, the appellant, John Gibbons, signed a contract to sell three lots of land which he owned at Woodlands, near the town of Letterkenny in County Donegal. The contract for sale in question incorporated the then current Law Society General Conditions of Sale, promulgated in 2001. The lands in question, comprising in total 7.93 hectares or thereabouts, were part of Folios 1984 and 17310F, Register of Freeholders, County Donegal.
This apparently simple transaction has given rise to litigation which has moved through the High Court, the Court of Appeal, and now this Court, rendering it necessary to address points of law which arise from this contract, including the true interpretation of Condition 30 of the General Conditions, the capacity of parties to a contract, the common law principles of agency, the law concerning pre-incorporation contracts, novation, ratification, and the discretionary nature of the remedy of specific performance.
John Gibbons is a farmer. Daniel Doherty, the first-named respondent, is a property developer who controlled a number of companies engaged in property development. Mr. Doherty was described in the contract for sale as the purchaser of the lands “in trust”. The second-named respondent, ADT Investments Limited (“ADT”), was formed at Mr. Doherty's behest for the purpose of acquiring the lands. The contract was to be performed by the sale of three lots, in three stages, over a three-year timespan. ADT was unable to complete the purchase of the third lot through lack of funding in late 2008.
Later, the appellant sued both respondents for specific performance of that third and final element of the contract. The High Court granted the appellant a decree for that relief, but only against ADT, the second respondent. However, the company did not have the funds to complete the sale of the third lot, and, therefore, could not comply with the High Court order. The High Court decision was upheld by the Court of Appeal. The appellant was granted leave to appeal to this Court. While a myriad of issues must be considered, the ultimate issue in this appeal is whether the appellant is entitled to specific performance against the first-named respondent in relation to completion of the sale of the third lot. The appellant submits that the earlier courts erred in holding him entitled to a decree only against ADT, and not against Mr. Doherty personally. He submits the Court of Appeal erred in its interpretation of Condition 30.
A further outline of the background is necessary. In the year 2006, the property boom was at its height. Property developers were often extremely anxious to acquire land with significant development potential. These lands were no exception. There was keen competition, amongst other bidders. Following quite complex negotiations, where there was some lack of clarity as to planning permission for the lands, Mr. Gibbons and Mr. Doherty arrived at a deal, later reduced to writing.
The contract was unusual in form. It envisaged the purchase of the lands for a total consideration of €4 million. On a rough calculation, therefore, the appellant was to receive the remarkable sum of approximately €504,413 per hectare, or slightly over €204,000 per acre. There was evidence that neighbours of Mr. Gibbons had received even higher figures for their lands around that time.
Under the contract, the sale of Lot 1 (of 4.98 hectares) for the sum of €2 million was to be completed 14 days after the purchaser received a facility-letter from an entity, referred to in correspondence from the purchaser's solicitor, as “his” lenders. It was agreed that the vendor might rescind the agreement in its entirety should the facility-letter not have been issued by the 16th March, 2007 (some three-and-a-half months after the date of the contract). In such an eventuality, the contract contained the unusual provision that the purchaser's deposit was to be refunded. As described later, the sale of Lot 1 was completed, but in the deed of transfer, the purchaser was named as ADT, the second-named respondent, and not Mr. Doherty.
The consideration for Lot 2, comprising 1.62 hectares, was €1 million. In this instance, the contract provided for a completion date of 12 months from the date on which the completion of Lot 1 took place. This sale was completed on the 26th April, 2008. The transfer deed again only named ADT as the purchaser.
The consideration for Lot 3, comprising 1.4 hectares, was €1 million. The contract provided that completion of the sale of this final lot was to take place within 24 calendar months of the completion of the purchase of Lot 1. As matters turned out, this would have been on 29th March 2009. The sale of this land did not proceed, giving rise to these specific performance proceedings.
By late 2008, the property market had weakened. In a telephone conversation, and in later meetings in October 2008, Mr. Doherty told Mr. Gibbons that, due to lack of funding, ADT would not be in a position to complete the purchase of Lot 3. Importantly, in the context of the relationship between an agent and principal, it emerged later that ADT had been registered as a limited company only on the 23rd February, 2007. This was two months after Mr. Doherty signed the contract of sale, but in sufficient time to be named as the purchaser in the transfer deed of Lot 1, which was dated six days later on the 29th March, 2007. The deed of transfer of Lot 2, again naming ADT as purchaser, was completed on the 26th April, 2008. The intended completion date of Lot 3 was, as already stated, 29th March, 2009. What took place in the course of the negotiations is described in more detail later. But these events must be viewed within the framework of the pleadings, and the court proceedings which followed.
The fact that specific performance is a discretionary remedy is well settled. The legal authorities also establish that a decree may be refused even on the grounds of delay alone ( Lark Developments Limited v. Dublin Corporation (Unreported, High Court, 10th February, 1993). The appellant's plenary summons, seeking specific performance of the purchase of Lot 3, was issued against the respondents on the 21st May, 2009. Later, there were amendments to the pleadings. The original pleadings on behalf of the appellant, drafted by different counsel, and the later amendments thereto, reveal some of the underlying issues which emerge for consideration in what, at first sight, might be thought of as a relatively simple scenario. How the case evolved requires close analysis, therefore.
When there was a failure to complete the sale of Lot 3, the appellant's solicitor served two completion notices, one addressed to the first respondent, and the other addressed to both respondents, also described as purchasers. In the subsequent plenary summons, the appellant sought specific performance of what was described there as a single contract, entered into between himself, as vendor, and the first respondent as “purchaser in trust” for the second respondent. The statement of claim, delivered on the 17th July, 2009, contained the same description of the capacity in which both the first and second respondents acted. The appellant pleaded, at the outset, that both the first- and second-named respondents had agreed to purchase the three lots in question for a total purchase price of €4 million, but that the respondents had failed to complete the purchase of Lot 3 for the sum of €1 million.
The original defence, delivered on the 10th March, 2010, accepted that ADT had completed the purchase of the first two lots, but pleaded that the appellant was incorrect in serving a completion notice on Mr. Doherty, the first respondent, because the second respondent, ADT, had been clearly identified as the purchaser in respect of Lot 3. The respondents pleaded that the first respondent had no obligation to complete the contract, and would rely upon General Condition 30 of the Law Society General Conditions of Sale, 2001, which they contended, provided that a purchaser, although he or she signed in trust, should not be personally liable to complete the sale, once the name of the principal had been identified to the vendor.
Having by then received advice from senior counsel, the appellant's solicitor served an amended plenary summons on the 17th November, 2011, two-and-a-half years after these proceedings had been initiated, and five years after the date of the contract of the 21st December, 2006. In the amended summons, the appellant abandoned the plea that the first respondent, Mr. Doherty, had purchased in trust for ADT. Instead, on foot of information which had by then emerged as a result of senior counsel's advices, the appellant made the case that, on the date of the contract, the second respondent had not existed as a legal entity, and that the contract had been entered into personally by the first respondent, Mr. Doherty, who had been the actual purchaser of the lands, and remained the beneficial owner of the interest therein. Arising from the fact that ADT had not been incorporated at the time of the contract, the appellant alleged that, at no time, had Mr. Doherty been a trustee for ADT, either when the lands were purchased or thereafter.
In an amended defence which followed on the 16th April, 2012, the respondents responded to these new pleas by stating it had been made clear at...
To continue reading
Request your trial