Kelly v Lennon

JurisdictionIreland
CourtHigh Court
JudgeMr. Justice Clarke
Judgment Date02 July 2009
Neutral Citation[2009] IEHC 320
Docket Number[2009 No. 1477P]
Date02 July 2009
Kelly & O'Sullivan v Lennon

BETWEEN

AIDEN KELLY AND MICHAEL O'SULLIVAN
PLAINTIFFS

AND

JAMES LENNON
DEFENDANT

[2009] IEHC 320

[No. 1477 P/2009]

THE HIGH COURT

ARBITRATION

Stay

Application of arbitration clause - Limitation of scope of arbitration clause - Whether appropriate to stay proceedings - Whether parties bound by arbitration clause -Whether valid and subsisting arbitration clause - Whether dispute governed by arbitration clause - Whether appropriate to fully stay proceedings pending arbitration - Whether appearance constituted step in proceedings - Doyle v Irish National Insurance Co plc [1998] 1 IR 89 approved - Incorporated Law Society General Conditions of Sale 2001, clause 33 and 51 - Arbitration Act 1954 (No 26), s 12 - Partial stay granted (2009/1477P - Clarke J - 2/7/2009) [2009] IEHC 320

Kelly v Lennon

CONTRACT

Sale of land

Continued validity - Whether contract validly rescinded - Whether contract capable of enforcement - Whether valid and subsisting arbitration clause - Limitation of scope of arbitration clause - Whether dispute governed by arbitration clause - Whether appropriate to fully stay proceedings pending arbitration - Incorporated Law Society General Conditions of Sale 2001, clause 33 and 51 - Partial stay on proceedings granted (2009/1477P - Clarke J - 2/7/2009) [2009] IEHC 320

Kelly v Lennon

Facts: The plaintiffs entered into a contract with the defendants to purchase certain lands. However, the plaintiffs contended that the contract came to an end and they sought a declaration to that effect and more particularly a declaration that the contract was validly rescinded by them. The plaintiffs also sought the return of the deposit paid by them. The defendant disputed the entitlement of the plaintiffs to either order and maintained that the contract continued in effect. In addition, the defendant maintained that the true dispute between the parties was governed by the standard from arbitration clause contained in the Law Society General Conditions of Sale, which was incorporated into the contract by the parties. Consequently, the defendant sought to have these proceedings stayed pending the resolution of certain issues by way of arbitration. There was some dispute between the parties regarding the actual boundaries of the lands in question and there was also some dispute regarding tenancies attaching to the lands. Two completion notices were served some time after the completion date but completion did not take place and the issues regarding boundaries and tenancies remained in dispute. In opposition to the application for a stay the plaintiffs argued that as the contract was validly rescinded, there was no longer an arbitration clause capable of enforcement and further that the entry of an unconditional appearance by the defendant herein amounted to a step in the proceedings, thereby precluding the granting of a stay pending arbitration.

Held by Clarke J. in staying part of the proceedings pending arbitration: That the real issues in this case will be in relation to the circumstance surrounding the attempts to close the sale, with a particular focus on the position adopted by the respective parties at that stage. The alleged discrepancy regarding the boundaries would, if established fall within the definition of 'an error' for the purposes of Condition 33. Furthermore, condition 51 provided that any issue on foot of Condition 33 was to be submitted to arbitration. There was a valid agreement between the parties and the arbitration clause contained within that agreement survived any contended termination of the contract. In a case such as this, where some but not all of the issues necessary to determine a cause of action in proceedings were subject to a valid arbitration clause, the court had a discretion as to the proper course of action to adopt. It was appropriate to stay any further consideration in these proceedings of the issues which arose under General Condition 33. It would be preferable for the court to have the answer to the arbitrator's consideration of the position before the court embarks on a trial of any other issues. Finally, the Arbitration Act 1954 expressly stated that an appearance was not to be treated as taking a step in the proceedings.

Reporter: L.O'S.

LAW SOCIETY GENERAL CONDITIONS OF SALE GENERAL CONDITION 33

LAW SOCIETY GENERAL CONDITIONS OF SALE GENERAL CONDITION 51

LAW SOCIETY GENERAL CONDITIONS OF SALE GENERAL CONDITION 33(B)

LAW SOCIETY GENERAL CONDITIONS OF SALE GENERAL CONDITION 33(D)

DOYLE v IRISH NATIONAL INSURANCE CO PLC 1998 1 IR 89 1998 1 ILRM 502 1998/5/1379

ARBITRATION ACT 1954 S12(1)

1. Introduction
2

2 1.1 On the 25 th May, 2007, the parties to these proceedings entered into a contract ("the Contract") for the sale of lands in County Westmeath for an agreed sum of €46,693,300. The defendant ("Mr. Lennon") was the vendor. The plaintiffs ("Mr. Kelly and Mr. O'Sullivan") were the purchasers. In circumstances which it will be necessary to explore in a little more detail, Mr. Kelly and Mr. O'Sullivan now contend that that contract is at an end. They have brought these proceedings for the purposes of seeking a declaration to that effect. More specifically, Mr. Kelly and Mr. O'Sullivan seek a declaration that the contract to which I have referred "has been validly rescinded" by them. Mr. Kelly and Mr. O'Sullivan also seek the return of a deposit in the amount of €9,093,000 together with interest on that sum under the terms of the contract. Mr. Lennon disputes the entitlement of Mr. Kelly and Mr. O'Sullivan to either order and, indeed, maintains that the contract continues in effect and remains capable of enforcement.

3

3 1.2 However, in addition Mr. Lennon maintains that what he says is the true dispute which arises in these proceedings is governed by the standard form arbitration clause contained in the Law Society General Conditions of Sale (2001 edition), which was incorporated into the contract by the parties. On that basis, Mr. Lennon seeks to have these proceedings stayed until such time as certain issues between the parties have been resolved by arbitration.

4

4 1.3 This judgment is directed to the question of whether it is appropriate to stay these proceedings in those circumstances. Some of the factual background to the dispute between the parties is relevant to a full understanding of the issues which have arisen under this application, and I, therefore, turn to the facts insofar as they are material to the issue which I now have to decide.

2. The Material Facts
2

2 2.1 The contract provided for a closing date six months from the date of its signing. As the contract was dated the 25 th May, 2007, the closing date was in November, 2007. The lands to be sold were described by reference to six different freehold folios. However, it would appear that, in the course of investigating title, differences arose between the parties as to the consistency of the physical boundaries of the lands with the boundaries of the land registry folios to which I have referred. It would appear that it was, at least at one stage, contemplated that an application might be made to the land registry for the purposes of rectifying those boundaries. Be that as it may, the question of closing the sale did not really come to a head until the latter part of 2008. Two completion notices were served, followed by correspondence between the respective parties' solicitors as to the basis upon which the respective parties might be willing to close the sale. On the evidence currently available it would appear that all of the closing requirements of Mr. Kelly and Mr. O'Sullivan (through their solicitors), were agreed save for two matters. The parties remained in dispute concerning the consequences of what was said to be an error, to which I have already referred, in the description of the lands, the subject matter of the contract, arising out of the difference between the boundaries on the ground and those contained in the relevant folios. In addition, there appears to have been some dispute between the parties concerning the issue of tenancies.

3

3 2.2 Special condition 5 of the contract provided that the property was to be sold "subject to and with the benefit of the Tenancies, particulars of which are set out in the First Schedule hereto and the Vendor shall not be required to hand over vacant possession of the said property on closing and General Condition No. 21 is amended accordingly".

4

4 2.3 The same clause went on to provide that the purchaser should be entitled to communicate and negotiate with the relevant tenants, while the vendor agreed not to communicate with those tenants "save on the direction of the Purchasers". It would appear that, prior to the events which I am describing, at least some of the relevant tenants had terminated their tenancies. Issues concerning the contractual entitlements of the parties in those circumstances appear to have arisen in the context of the closing requirements made by the respective solicitors acting for the parties.

5

5 2.4 Against that background it is next appropriate to turn to the issues which are likely to arise in these proceedings.

3. The Issues in these Proceedings
2

2 3.1 The net issue between the parties is, of course, as to whether the contract between them is validly at an end in circumstances where Mr. Kelly and Mr. O'Sullivan would be entitled to a repayment of their deposit, together with interest. However, in addressing that issue it seems clear that a number of further sub-issues will necessarily arise. It does not appear to be disputed but that a valid completion notice was served. Equally it is clear that completion did not take place. The position of the parties will, therefore, depend on the view which the court ultimately takes...

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10 cases
2 firm's commentaries
  • COVID-19 Public Policy Considerations Insufficient To Render A Dispute Non-Arbitrable
    • Ireland
    • Mondaq Ireland
    • 7 September 2021
    ...consequence of the proper interpretation of the clause, and is 'an eventuality which sometimes does arise, as it did in Kelly v. Lennon [2009] 3 IR 794.' The court also rejected the plaintiff's non-arbitrable contention stating that the dispute in relation to the claim for an indemnity 'is ......
  • COVID-19 Public Policy Considerations Insufficient To Render A Dispute Non-Arbitrable
    • Ireland
    • Mondaq Ireland
    • 7 September 2021
    ...consequence of the proper interpretation of the clause, and is 'an eventuality which sometimes does arise, as it did in Kelly v. Lennon [2009] 3 IR 794.' The court also rejected the plaintiff's non-arbitrable contention stating that the dispute in relation to the claim for an indemnity 'is ......

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