O'Mahony v Promontoria (GEM) DAC
| Jurisdiction | Ireland |
| Judge | Ms. Justice Máire Whelan |
| Judgment Date | 19 February 2020 |
| Neutral Citation | [2020] IECA 30 |
| Court | Court of Appeal (Ireland) |
| Docket Number | Record Number: 2018/69 |
| Date | 19 February 2020 |
AND
[2020] IECA 30
Baker J.
Whelan J.
McGovern J.
Record Number: 2018/69
THE COURT OF APPEAL
Specific performance – Punitive damages – Exemplary damages – Appellant seeking to appeal against a judgment delivered in the High Court and consequent orders granting specific performance of an agreement for the release and discharge by the appellant of all indebtedness and securities over certain assets of the respondents – Whether the award of exemplary damages was erroneously made
Facts: The appellant, Promontoria (Gem) DAC, appealed to the Court of Appeal against a judgment delivered in the High Court (Haughton J) on the 8th February, 2018 and consequent orders, perfected on the 21st February, 2018, granting specific performance of an agreement for the release and discharge by the appellant of all indebtedness and securities over certain assets of the respondents, Mr O’Mahony, Diamond Developments Ltd, Bride View Developments Ltd, Ambledene Ltd and Ms O’Mahony, in accordance with an agreement determined to have been evidenced in writing by email dated 20th June, 2017. The said agreement was determined by the Court to have been varied in terms of the amount of the deposit and as to the mode of implementation thereof. The High Court declared invalid a purported notice of termination of a 2014 settlement agreement served by the appellant on the first and second respondents on the 7th September, 2017 and dismissed a counterclaim against the second respondent. The Court further awarded €20,000 by way of exemplary or punitive damages in favour of the first respondent. The key grounds of appeal relied upon included: (i) that the trial judge erred in the manner he dealt with the application for a direction including his application of the law and his drawing of inferences which, it was argued, displayed partiality; (ii) his error in finding that a specifically enforceable contract had come into existence between the parties arose, inter alia, from his erroneous treatment of the words “subject to contract” in correspondence between the parties and his construction of correspondence as giving rise to acceptance rather than constituting a counter offer which was never accepted by the respondents; (iii) the appellant contended that the deposit and its amount were material terms of the contract as was the structure intended to give effect to the transaction which the trial judge erroneously failed to characterise as such; (iv) it was argued that the respondents were unable to show that they were “ready, willing and able” to complete the transaction in late August 2017; (v) the appellant contended that its notice of termination dated 7th September, 2017 was valid and that an award of €20,000 exemplary damages was made on an erroneous basis, the trial judge having erred in finding that the appellant was guilty of “egregious misconduct” and “oppressiveness” in its dealings with the respondents in relation to the alleged contract.
Held by Whelan J that the law does not admit of a punitive damages award for breach of contract simpliciter and in the absence of fraud, deceit, concomitant tortious wrongdoing, or breach by a public or State authority of its contractual, statutory or constitutionally mandated obligations. Insofar as the award of punitive damages was referable to breaches of contract, Whelan J held that it must be set aside. Whelan J held that the award of punitive damages arising from the cross-examination and the conduct of the defence in court must be set aside as trenching on the constitutional rights of the appellant.
Whelan J held that the award of exemplary damages was erroneously made and required to be set aside. Otherwise Whelan J held that he would affirm the orders of the High Court.
Appeal allowed in part.
This is an appeal against a judgment delivered in the High Court (Haughton J.) on the 8th February, 2018 and consequent orders, perfected on the 21st February, 2018, granting specific performance of an agreement for the release and discharge by the appellant of all indebtedness and securities over certain assets of the respondents in accordance with an agreement determined to have been evidenced in writing by email dated 20th June, 2017. The said agreement was determined by the Court to have been varied in terms of the amount of the deposit and as to the mode of implementation thereof.
The High Court declared invalid a purported notice of termination of a 2014 settlement agreement served by the appellant on the first and second named respondents on the 7th September, 2017 and dismissed a counterclaim against the second-named respondent. The Court further awarded €20,000 by way of exemplary or punitive damages in favour of the first named respondent.
The first named respondent was a successful developer until the economic crash. He had substantial borrowings with AIB Bank Plc. and had granted security to the said bank in respect of same. The second and third named respondents had also provided certain guarantees or otherwise assumed obligations in respect of the said liabilities. The development loans with AIB were transferred to the National Asset Management Agency (NAMA) in December 2009 during the economic crash. Pursuant to the powers provided to NAMA under the National Asset Management Agency Act, 2009, the entity National Asset Loan Management Designated Activity Company (NALM) became legally and beneficially entitled to all of the said facilities, the security and all other rights connected to them.
The first and fifth respondents are husband and wife (the O'Mahonys). The fifth respondent was not a party to the original loans or charges and is a party to these proceedings primarily by reason of her beneficial interest in a property adjacent to the family home which was the subject of a guarantee specified in a settlement agreement of 1st October, 2014 referred to hereafter.
The settlement agreement provided that the O'Mahonys would be left with their family home together with another property free from debt. The High Court characterised the fifth respondent's involvement thus: -
“Firstly, that an ancillary dwelling house on a plot beside Mr. and Mrs. O'Mahony's home at Moneygourney, Douglas, be charged to NALM by way of First Legal Charge as security for Mr. O'Mahony's obligations. It is solely because Mrs. O'Mahony had a beneficial interest in this property that she is a co-plaintiff.”
Some, but not all, of the secured assets were thereafter sold by NAMA and in particular four specific development properties in Co. Cork remained undisposed of as of January 2017 when the rights of NAMA/NALM under the loans, securities and the 2014 settlement agreement were transferred to Promontoria, the appellant. As of May 2016, the four remaining development properties all situate in Co. Cork were vested in the second respondent, Diamond Developments Limited.
Pursuant to the terms of the deed of transfer dated the 27th January, 2017 and made between NALM and the appellant, the latter acquired all the rights, title and interest of NALM/NAMA to the said facilities and the security.
Thereafter, there was engagement between Mr. O'Mahony and the appellant with a view to reaching agreement between them for the redemption of the loans, discharging all liabilities and securing unencumbered title to the relevant properties.
In or about the month of May 2017, Mr. O'Mahony made an offer to the appellant to discharge the indebtedness for a sum of €4M. By email dated the 9th May, 2017 the appellant rejected that offer and invited an offer “at or above €6M” which was characterised as the appellant's “target price”. At all material times communications on behalf of the appellant were primarily through their agent, Capita Asset Services (Ireland) Limited (“Capita”).
On the 22nd May, 2017 Mr. O'Mahony made an offer to pay €6,000,000 for the release of the four secured properties unencumbered with closing to be effected on the 31st August, 2017. This offer made no reference to the payment of a deposit.
On the 6th June, 2017 Capita emailed Mr. O'Mahony stating “… The approval request for this deal is progressing”. Certain information was sought, including concerning mezzanine or short-term lending options. The email stated in respect of the appellant “Our client seeks a ten percent deposit upon signing to demonstrate your commitment to the deal”.
Over two weeks later by email dated the 20th June, 2017, entitled “Heads of Terms and KYC”, the appellant responded to the May 22nd offer. The legal effect of this email was a central issue in the High Court. There was a fundamental dispute between the parties as to whether the said email contained all the essential terms of the agreement between the parties and whether it introduced any new material terms, particularly with regard to the requirement for a deposit of ten percent and whether in substance the said email amounted to a counter offer on the part of the appellant which was never thereafter expressly accepted or performed by the respondents.
The respondents argue that they concluded a binding agreement with the appellant in full and final settlement of their indebtedness to it and for the release of the properties charged, which are listed in the Schedule to the plenary summons, free from all claims, securities and demands in consideration of the payment of the total consideration of €6,000,000.
The appellant contends that since relevant email communications were expressed to be “subject to contract” the email of the 20th June, 2017 did not give rise...
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