Kelly (plaintiff) v Simpson

• Jurisdiction: Ireland
• Judge: Mr. Justice Charleton
• Judgment Date: 01 December 2008
• Neutral Citation: [2008] IEHC 374
• Judgment citation (vLex): [2008] 12 JIC 0101
• Court: High Court
• Date: 01 December 2008

[2008] IEHC 374

THE HIGH COURT

[No. 2629 P/2008]

Kelly v Simpson

COMMERCIAL DIVISION

BETWEEN

VINCENT KELLY

PLAINTIFF

AND

JOHN SIMPSON

DEFENDANT

ROBERTS v O'NEILL 1983 IR 47

FARRELL IRISH LAW OF SPECIFIC PERFORMANCE 1994 PARA 9.35

FARRELL IRISH LAW OF SPECIFIC PERFORMANCE 1994 PARA 9.37

MCGRATH v STEWART UNREP HIGH 11.11.2008 2008 IEHC 348

POST v MARSH (1880-81) LR 16 CH D 395

LANIGAN & ORS v BARRY & ORS UNREP HIGH CHARLETON 15.2.2008 2008 IEHC 29

GILLINGHAM BOROUGH COUNCIL v MEDWAY (CHATHAM) DOCK CO LTD & ORS 1993 QB 343

CONTRACT

Specific performance

Contract for sale of land - Fundamental ingredients - Agreement on price - Representations of agent of vendor regarding development potential - Representations designed to undermine planning code - Inducing of defendant - Failure to close - Equitable remedy - Obligation to have Çÿclean hands' - Discretion - Balancing of competing interests - Fairness - Rights of parties - Rights of community - Purpose of planning code - Duty of court - Roberts v O'Neill [1983] IR 47, McGrath v Stewart [2008] IEHC 348 (Unrep, Murphy J, 11/11/2008), Smelter Corporation v O'Driscoll [1977] IR 305, Curust Financial Services Ltd v Loewe Lack-Werk [1994] 1 IR 450, Kavanagh v Caulfield (Unrep, Murphy J, 19/6/2002), Post v Marsh (1880) 16 Ch 395, Lanigan v Barry [2008] IEHC 29 (Unrep, Charleton J, 15/2/2008) and Gillingham Borough Council v Medway (Chatham) Dock Co Ltd [1993] QB 343 considered - Specific performance refused - (2008/2629P - Charleton J - 1/12/2008) [2008] IEHC 374

Kelly v Simpson

Facts: An order for specific performance was sought in respect of a contract for the sale of land in Schull. The issue arose as to the price agreed. A deposit payment had been deferred and was never sought. The defendant had registered his interest in the property at the price of €1,500,000. A closing date of 2007 was agreed. It was contended that a contract was not entered into as issues arose between the plaintiff vendor and defendant purchaser in relation to the closing date. The dispute arose as to the development potential of the site. Representations to the planning authorities were alleged to have been made with the intention of making it appear that the premises were substantially roofed and ruined. The agent of the plaintiff had attempted to dispose of the property when a dispute was ongoing as to whether the defendant had entered the contract.

Held by Charleton J. that for the Court to exercise its discretion in this instance, equitable principles had to apply. The price of the contract would not have been achieved had the defendant not been induced to consider the lands being more valuable that in fact there were by specific representations designed to undermine the planning process. The Court would make no ruling on the illegality of the contract. It was the duty of the court not to grant an equitable remedy where specific performance would require the purchaser to take the property at a price achieved due to a scheme to undermine the planning code. The Court would refuse to enforce the contract.

Reporter: E.F.

1 1. The fundamental ingredients in a contract for the sale of land require that the parties be identified as vendor and purchaser, that the land should be identified with substantial precision and that the price should be agreed. Of these three, the price of the land is the most common variable, it being dependant on many factors; among these are the state of the property, its location, the buoyancy of the market and the legal restrictions that are likely on development. Normally, the motivation for any person selling or buying land is irrelevant to any consideration of the validity of such a contract. In his application for a specific performance order, however, it seems to me to be crucial. I am being asked to exercise the equitable jurisdiction of the court in order to compel the defendant to purchase the plaintiff's property at a value agreed between the parties that is only referable to their motives in purchasing and disposing of it.

The Contract

2 2. The property in question is at Coosheen, Schull in County Cork. It consists of about 2.5 acres perched above the town, on which there is an existing bungalow together with an old stone ruin. On the eastern side of the property there was a wooded area with scrub undergrowth. The site enjoys an elevated view over the town of Schull and the Atlantic islands of Sherkin and Oileán Chléire. The plaintiff says that he bought this property in December 2006 through Martin Swanton, an auctioneer who trades under the name of Swanton Properties. He bought it to sell it. He thought that the site would be capable of development and put it on the market as such. As his agent Mr Swanton presented the property to the defendant, it was its development potential that attracted the potential purchaser's interest. But for that, I am convinced, the price agreed would not have been offered. That potential was of fitting two more houses onto the site and demolishing the existing bungalow and building a substantial replacement in the shape of an 'executive residence'. In the sale advice note, which was drawn up subsequent to the negotiations that fixed the price between the plaintiff as vendor and the defendant as purchaser, the selling agent is identified as Martin Swanton. Therefore, for the purposes of what follows, he was at all times the agent of the plaintiff, as vendor. In that context, I would infer that Mr. Swanton had kept the plaintiff informed as to all interest concerning the site.

3 3. Because Mr. Swanton knew the defendant, he approached him with a view to seeing if he was interested in purchasing the property. On 20 ^th May, 2007 the defendant and a friend viewed the property and was told that the price was to be €1,500,000.00. There was no assent by the defendant to that price and, as of that stage, no contract was entered into. The defendant was anxious not to pay a 5% booking deposit and nor was he anxious to pay a 10% deposit on the signing of a contract of sale. When he later agreed to buy the property, payment of a deposit of €150,000.00 was deferred to an unspecified date prior to the sale closing, provided the plaintiff as vendor assented. As it turned out, the deposit was never sought by the plaintiff as vendor, because he regarded the business reputation of the defendant as sufficient proof of his intent. The defendant became interested in buying the property for the price of €1,500,000, however, and signed a form by way of registering an interest the next day: this is the booking advice form. I will return to the issue of why he was prepared to pay so much.

4 4. The sales advice note dated 21 ^st May, 2007 gives the name and address and telephone number of both the vendor and the purchaser and also gives particulars of the legal representatives of both the plaintiff and the defendant. It specifies the purchase price and recites that:-

"No agreement shall be deemed to be enforced or binding on the parties until a formal contract has been signed by both parties and a full deposit duly paid…"

The document states that a booking deposit had already been paid and sets out a provisional closing date of 31 ^st July, 2007. No such deposit had been paid. This document was copied to both the vendor and the purchaser.

5 5. On 29 ^th May, 2007 the vendor sent a contract for sale in duplicate to the purchaser. In the printed form, this specified the closing date as being 31 ^st July, 2007 as had originally been envisaged. In the meantime, the defendant as purchaser had proposed that a certain number of trees should be cut down on the site with a view to facilitating a digital survey of the contours of the property. This was done with a view to making an application for planning permission for two dwellings, in addition to the one already present on the site, to the local authority.

6 6. On 11 ^th July, 2007 an architect's report relevant to planning was received by the defendant as purchaser. This recites that the Cork County Development Plan had set out a strategy for settlement in this rural area that sought to focus development into towns while providing for "the genuine needs of locals wishing to live in the rural area in which they were brought up". The report indicates that the site is located within a scenic amenity zone where the development plan envisaged the preservation of the natural beauty of those areas and to preserve the character of the views and prospects from existing roads. A further restriction on planning was noted in the context of the capacity of coastal areas to absorb additional houses. The report from the architect mentions that the county development plan provides specific guidance on ruinous dwellings in the countryside, noting that it was not the intention of the planning authority to prevent renovation "in appropriate cases". It remained possible that the planning authority might consider that there was sufficient upstanding remains of a ruin to grant permission "subject to appropriate design and general proper planning and development considerations". The report concludes:-

"The subject site is located in a sensitive coastal location. The area is both highly scenic and also located within the greenbelt area for Schull village. It is therefore considered that any development of the site should take a place on an individual basis by locals who meet the qualifying criteria for rural housing. It is considered that one additional dwelling may be permitted on the site."

7 7. It is contended in this case that a contract was not entered into between the plaintiff as vendor and the defendant as purchaser because of issues concerning the closing date. As has been noted, the original closing date was that specified in the contract...