Gibbons v Doherty and Another

• Jurisdiction: Ireland
• Judge: Mr. Justice Roderick Murphy
• Judgment Date: 14 March 2013
• Neutral Citation: [2013] IEHC 109
• Court: High Court
• Date: 14 March 2013

[2013] IEHC 109

THE HIGH COURT

[No. 4623 P./2009]

Gibbons v Doherty & ADT Investments Ltd

BETWEEN

JOHN GIBBONS

PLAINTIFF

AND

DANIEL DOHERTY AND ADT INVESTMENTS LIMITED

DEFENDANTS

COMPANIES ACT 1963 S37

LAW SOCIETY'S GENERAL CONDITIONS 2001 CONDITION 30

DUBLIN LAUNDRY COMPANY v CLARKE 1989 ILRM 29

IRISH CONVEYANCING LAW 2ED BUTTERWORTHS 1996 PARA 18.8

COURTNEY PRIVATE COMPANIES 2ED BUTTERWORTHS 2002 PARA 7.039

LAVAN v WALSH 1964 IR 87

PHIPSON ON EVIDENCE 17ED SWEETMAN & MAXWELL 2012 PARA 5.07

PHIPSON ON EVIDENCE 17ED SWEETMAN & MAXWELL 2012 PARA 5.26

IRISH CONVEYANCING LAW 2ED BUTTERWORTHS 1996 PARA 18.18

CURTIS MOFFAT LTD v WHEELER 1929 2 CH 224

FARRELL IRISH LAW OF SPECIFIC PERFORMANCE BUTTERWORTHS 1994 PARA 3.35

UNITED YEAST COMPANY LTD v CAMEO INVESTMENTS LTD 1975 111 ILTR 13

PARKGRANGE INVESTMENTS LTD v SHANDON PARK MILLS LTD UNREP CARROLl 2.5.1991 1991/10/2303

MOUNT KENNETT INVESTMENT LTD v O'MARA UNREP SMYTH 21.11/.007 2007/42/8875 2007 IEHC 420

MURPHY & MACKIN v RYAN & ORS UNREP KELLY 24.6.2009 2009/41/10245 2009 IEHC 305

COURTNEY THE LAW OF COMPANIES 3ED BUTTERWORTHS 2012 PARA 17.037

COURTNEY THE LAW OF COMPANIES 3ED BUTTERWORTHS 2012 PARA 17.044

COMPANIES ACT 1963 S37(1)

HKN INVEST OY v INCOTRADE PVT LTD 1993 3 IR 152

CONTRACT LAW

Pre-incorporation contract

Specific performance - Sale of land - Ratification of pre-incorporation contract - Trust for development company not yet incorporated - Company subsequently incorporated but unable to raise funds -Whether first defendant personally liable to perform contract - Contract executed in trust and principal disclosed subsequently - Signature as trustee - Dublin Laundry Company v Clarke [1989] ILRM 29; Lavan v Walsh [1964] IR 87; Moffat Ltd v Wheeler [1929] 2 Ch 224; United Yeast Company Ltd v Cameo Investments Ltd (1975) 111 ILTR 13; Park Grange Investments Ltd v Shandon Park Mills Company Ltd (Unrep, Carroll J, 2/5/1991); Mount Kennett Investment Company v O'Meara [2007] IEHC 420, (Unrep, Smyth J, 21/11/2007); Murphy v Ryan [2009] IEHC 305, (Unrep, Kelly J, 24/6/2009) and HKN Invest OY v Incotrade PVT Ltd [1993] 3 IR 152 considered - Companies Act 1963 (No33), s 37 - Order for specific performance granted against second defendant (2009/4623P - Murphy J - 14/3/2013) [2013] IEHC 109

Gibbons v Doherty

Facts The first defendant had entered into a contract to buy lands from the plaintiff. The lands were divided into three lots. The first named defendant completed the purchase of the first two lots. The contract in respect of the third lot was not completed and the plaintiff issued the present proceedings seeking an order for specific performance in respect of the contract. On behalf of the first named defendant it was contended that the plaintiff had incorrectly served a completion notice on the first named defendant as the second named defendant had clearly been identified as the purchaser. The first named defendant had no obligation to complete the contract. It was also contended that the first named defendant had entered into the contract in trust and, in due course, had disclosed his principal. The plaintiff submitted that at all material times the first named defendant was the actual purchaser of the lands and at no material time was the first named defendant a trustee for the second named defendant.

Held by Murphy J in granting the decree of specific performance against the second named defendant: In the present case the defendant”s evidence was that it was no longer possible to have bank funding for the completion of the third lot. The court was satisfied that there was no neglect or default on the part of the defendants. The court was satisfied that the plaintiff had accepted the second named defendant as purchaser in respect of lots 1 and 2. The completion of the purchase of lot 3 was not pursuant to a separate contract, but was subject to the original contract. The first named defendant had contracted in trust, the identity of the company was made known prior to the closing of the first lot, was not subject to loan approval and was closed by the second named defendant in respect of lots 1 and 2. The court would accordingly make an order for specific performance in respect of lot 3 as against the second named defendant.

1 JUDGMENT of Mr. Justice Roderick Murphy delivered the 14th day of March 2013

1. Pleadings

2 By plenary summons dated the 21 ^st May, 2009, the plaintiff sought an order for specific performance of contract dated the 21 ^st December, 2006, entered into between the plaintiff as vendor and the first named defendant as purchaser in trust for the second named defendant, in relation to lands being part of Folio 1984F and part of Folio 17310F, both of the register of freeholders in the County of Donegal containing 7.93 hectares otherwise 19.595 acres or thereabouts. The plaintiff claimed damages for breach of contract in addition to, or alternative to, the reliefs claimed.

3 The statement of claim had referred to the total purchase price being €4 million with a deposit of €20,000 in respect of three separate lots.

4 The first lot contained 4.9 hectares for a consideration of €2 million. Completion was to take place fourteen days after the receipt by the purchaser of a facility letter from his lenders, provided that the vendor might rescind the agreement in its entirety should the facility letter not have been issued by the 16 ^th March, 2007 (some three and a half months after the date of the contract) in which case even the purchaser's deposit was to be refunded.

5 The second lot containing 1.62 hectares for a consideration of €1 million provided for a completion date twelve months from the date from which the first completion took place.

6 The third lot containing 1.42 hectares for a sum of €1 million provided for completion to take place within 24 calendar months after the completion of lot 1.

7 The amended statement of claim delivered the 21 ^st November 2011, referred to the first named defendant as purchaser and purportedly as trustee of the second named defendant who did not then exist.

8 The amended statement of claim stated specifically that:-

9 2 "4. On the 21 ^st day of December, 2006, the second named defendant did not exist and was not a legal entity and had not been brought into existence on the date that the said memorandum of agreement was entered into by the plaintiff and the first named defendant and, at all material times therefore, the purchase of the lands the subject matter of the proceedings as described was purchased on foot of a contract entered into personally by the first named defendant and, at all material times, the first named defendant was the actual purchaser of the said lands. At all material times the first named defendant was the beneficial owner of the interest in the contract for sale of the said lands.

10 5. At no material time therefore at the purchase/sale of the lands was the first named defendant a trustee for the second named defendant."

11 The amended statement of claim pleaded that, at all material times, the first named defendant was personally liable to perform the said contract as between the plaintiff and the first named defendant yet failed to do so.

12 The first named defendant completed the purchase of the first two lots. The third lot was due to be completed and paid for by the 29 ^th March, 2009. It was further pleaded that there was one contract and that the lands were sold in lots to facilitate the defendant's request to allow ease of payment in relation to the purchase.

13 On the 8 ^th October, 2008, it was pleaded that the first named defendant approached the plaintiff and informed him that he would not be in a position to complete the outstanding balance of the transaction notwithstanding the existence of the executed contract as between the parties, and he sought to resile from the contract.

14 The plaintiff pleaded that he was in a position to complete the said contract and served an undated completion notice on each of the defendants.

15 The amended defence delivered on the 22 ^nd October, 2012, agreed the contract of the 21 ^st December, 2006, and the particulars set out in the statement of claim, though the use of the word "purportedly" was disputed.

16 The plaintiff was put on full proof that there was one contract and that the lands were sold in lots to facilitate the defendants. Without prejudice, the first named defendant made it clear at all times that he was executing the contract in trust and, in due course, disclosed his principal. At all times thereafter the plaintiff dealt with the said principal, namely the second named defendant, and took no issue with any of the transactions.

17 It was not admitted that on the 8 ^th October, 2008, that the first named defendant approached the plaintiff and informed him that he would not be in a position to complete. The defendant awaited proof thereof.

18 It was contested that the plaintiff was in a position to complete in relation to the said contract and, while it was accepted that the second named defendant had completed the purchase of the first two lots, the defendants awaited proof in relation to the distinction between the first two lots and the third lot.

19 It was admitted that the completion notice was served on the 3 ^rd April, 2009, upon both defendants but the plaintiff was incorrect in serving a completion notice on the first named defendant, the second named defendant having been clearly identified as the purchaser in respect of lot 3. The first named defendant had no obligation to complete the contract. The plaintiff was not entitled to seek damages for breach of contract against the first named defendant who relied on condition 30 of the contract, which provided that a purchaser, although signing in trust,...