Marlan Homes Ltd v Walsh & Wedick

JurisdictionIreland
JudgeMcKechnie J.
Judgment Date30 March 2012
Neutral Citation[2012] IESC 23
CourtSupreme Court
Date30 March 2012
Marlan Homes Ltd v Walsh & Wedick
Marlan Homes Limited
Plaintiff/Respondent

and

Mark Walsh and Gary Wedick
Defendants/Appellants

[2012] IESC 23

Murray J.

O'Donnell J.

McKechnie J.

[S.C. No. 95 of 2010]

THE SUPREME COURT

CONTRACT LAW

Interpretation

Intention of parties - Sale of lands - Whether vendors required to compel local authority to consent to mortgage of lands - Whether vendors required to execute limited recourse mortgage - Whether vendors agreed to terms that could not be fulfilled - Whether vendors in fundamental breach of contract - Whether purchasers entitled to rescission - Whether trial judge erred in construction of contract - Whether trial judge substituted own views of bargain for those actually contracted for - Marlan Homes Ltd v Walsh [2009] IEHC 135, (Unrep, Clarke J, 20/3/2009); Marlan Homes Ltd v Walsh [2009] IEHC 576, (Unrep, Clarke J, 21/12/2009); Northern Bank Finance Corp v Charlton [1979] IR 149; Aga Khan v Firestone [1992] ILRM 31 and Lac Minerals Ltd v Chevron Mineral Corp of Ireland [1995] 1 ILRM 161 considered - Kramer v Arnold [1997] 3 IR 43; Ryanair Ltd v An Bord Pleanála [2008] IEHC 1, (Unrep, Clarke J, 11/1/2008); Analog Devices BV v Zurich Insurance Co [2002] 1 IR 272; Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 and Torvald Klaveness A/S v Arni Maritime Corp [1994] 1 WLR 1465 approved - Charter Reinsurance v Fagan [1997] AC 313 applied - Appeal allowed; High Court order set aside (95/2010 - SC - 30/3/2012) [2012] IESC 23

Marlan Homes Ltd v Walsh

Facts: The proceedings arose out of a dispute concerning the provision of mortgage facilities over certain lands. The lands were the subject of an agreement and an issue arose as to contractual interpretation of the so-called November and December Agreements. The High Court had determined two preliminary questions and the appellants had served notice of appeal. The High Court found that the appellants were in fundamental breach of the November Agreement and that Marlan Homes were entitled to have that Agreement rescinded. The appellants had sought to assemble three plots of land as a single unit. The December Agreement was an agreement for lease and not a lease. The November Agreement conferred an exclusive licence on Marlan Homes to enter to carry out developments and was structured to avoid conventional legal title transfer. The Court considered restrictions on alienation and whether Dublin City Council were required to consent to a mortgage and whether the defendants were required to execute a further recourse mortgage. The question arose as to whether the trial judge had committed an error of law and the extent to which it was possible to interpret the Agreement as conferring a contractual right to a non-recourse mortgage.

Held by the Supreme Court per McKechnie J. (Murray, O' Donnell JJ. Concurring), that the appellants were not in breach of any obligation undertaken by them to Marlan Homes. The appeal would be allowed and the orders made in the High Court set aside. The consideration had wholly failed.

Reporter: E.F.

MARLAN HOMES LIMITED v WALSH & WEDICK UNREP CLARKE 20.3.2009 2009/38/9383 2009 IEHC 135

MARLAN HOMES LIMITED v WALSH & WEDICK UNREP CLARKE 21.12.2009 2009/38/9401 2009 IEHC 576

KRAMER v ARNOLD 1997 3 IR 43 1997/9/3148

RYANAIR LTD v BORD PLEANALA UNREP CLARKE 11.1.2008 2008/56/11640 2008 IEHC 1

NORTHERN BANK FINANCE CORP LTD v CHARLTON & SHEEHY 1979 IR 149

ANALOG DEVICES BV & ORS v ZURICH INSURANCE CO & AMERICAN GUARANTEE & LIABILITY INSURANCE CO 2002 1 IR 272 2002 2 ILRM 366 2002/1/187

INVESTORS COMPENSATION SCHEME LTD v WEST BROMWICH BUILDING SOCIETY 1998 1 WLR 896 1998 1 AER 98 1998 1 BCLC 493

TORVALD KLAVENESS AS v ARNI MARITIME CORP 1994 1 WLR 1465 1994 4 AER 998 1995 1 LLOYDS 1 1994 CLC 1188

CHARTER REINSURANCE CO LTD (IN LIQUIDATION) v FAGAN 1997 AC 313 1996 2 WLR 726 1996 3 AER 46

AGA KHAN & AKAZAWA v FIRESTONE 1992 ILRM 31 1991/7/1527

LAC MINERALS LIMITED v CHEVRON MINERAL CORP OF IRELAND & IVERNIA WEST PLC UNREP KEANE 6.8.1993 1993/12/3862

KEANE EQUITY & THE LAW OF TRUSTS IN THE REPUBLIC OF IRELAND 1ED 1988 PARA 716

ANALOG DEVICES BV & ORS v ZURICH INSURANCE CO & AMERICAN GUARANTEE & LIABILITY INSURANCE CO 2005 1 IR 274 2005 2 ILRM 131 2005 2 242 2005 IESC 12

1

Judgment delivered on the 30th day of March, 2012 by McKechnie J.

2

JUDGMENT DELIVERED BY McKECHNIE J. [NEM DISS]

3

1. The issues on this appeal arise out of a dispute between the parties regarding the provision of mortgage facilities over certain lands situated at Kilmore Road, Artane in the City of Dublin. These lands were the subject matter of an agreement in writing dated the 23 rd November, 2006 (the "November Agreement"), made between the defendants/appellants ("the appellants") of the one part and the plaintiff/respondent ("Marlan Homes") of the other part. As of the date of its execution the appellants and Dublin City Council ("DCC") were in a state of advanced negotiation with regard to a certain portion of such lands, which was in the ownership of the council. An agreement in respect thereof was reached between these parties and committed to writing on the 20 th December, 2006 (the "December Agreement"). Although evidently not concluded at the time of the November Agreement, there is, as will be seen, a close relationship between both such Agreements. It is by reference to these documents that the respective rights and obligations of the parties must be determined. In essence the disputed issue is one of contractual interpretation.

4

2. The High Court, as part of its resolution of this matter, was asked to determine two preliminary questions. It did so by way of order dated the 27 th March, 2009, which reflected a judgment previously given by Clarke J. on the 20 th March, 2009 [2009] IEHC 135. The appellants have served a notice of appeal in respect of this judgment and order.

5

3. Following upon such decision and in light of it, the High Court then proceeded to deal with the substantive issues between the parties. By judgment dated the 20 th December, 2009 [2009] IEHC 576, Clarke J. held that, the appellants were in fundamental breach of the November Agreement and in the circumstances as found by him, further held that Marlan Homes were entitled to have that Agreement rescinded. Certain consequential orders were made as a result. Again, the appellants have served a notice of appeal arising out of this judgment. Both appeals were heard together and it is in respect thereof that this judgment is now being delivered.

6

4. The lands in question are Land Registry lands and are contained in three different folios. The appellants, prior to any engagement either with Marlan Homes or DCC, were registered owners with absolute title of the lands in two of those folios namely, Folio 929F and Folio 35060F County Dublin. The third parcel of land, comprising 1,390 sq metres or thereabouts, is part of Folio 4021, County Dublin, which has DCC as its registered owner. It is situated immediately contiguous to the lands first mentioned. For the purposes of a construction project, the appellants intended to assemble all such lands as a single unit, on which a residential development, authorised by Planning Permission (No. 4625) dated the 14 th September, 2005, could be carried out. DCC consented to have its lands included, within the "development lands", for the purposes of the planning application. Evidently therefore, contact had existed between these parties for some considerable time before the agreement of November, 2006 was entered into.

7

5. Under the December Agreement the appellants obtained, (i) the right to enter on the lands of DCC within eight weeks of the issue of the planning permission and to remain thereon for a period of eighteen months, for the purposes of constructing the development ("the approved development") authorised by the said planning permission, and (ii) the right, when building works were completed to wall plate level and finished to a standard acceptable to DCC, and on payment of any balance due under its provisions, to obtain a lease of the land for a term of 999 years subject to an annual rent of €50 (Clause 12); the form of such lease being scheduled to this Agreement.

8

These entitlements were subject inter alia to the payment of €710,000, 15% of which was payable, and paid on the date of execution with the balance being payable on the date of entry. Apparently a cheque for €603,500 to represent this sum was sent to DCC on the 20 th July 2007 but to date the cheque remains uncashed.

9

6. In addition, Clause 14 of the December Agreement provided:

"The agreement is an agreement for lease and shall not operate as a lease and shall not be transferable save in the case of a financial institution which has entered into a mortgage with the proposed lessee, details of which mortgage will be provided to the Council in writing and must have been entered into specifically for the purposes of financing the proposed lessee to enable it undertake the approved development on the site the subject matter of this agreement".

10

As can be seen the December Agreement between the appellants and DCC was an agreement for lease and not a lease and by virtue of this clause there was a restriction on alienation, save for the specific purpose as outlined. As will become clear in a moment, this provision has a significant bearing in determining what obligations the appellants and Marlan Homes undertook, with regard to mortgage procurement, under the November Agreement.

11

7. In broad terms the November Agreement conferred an exclusive licence and authority on Marlan Homes to enter, what was described as the "subject lands", for the purpose of carrying out the approved...

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