McA Bhaird v Commissioner of Public Works in Ireland [No 2]

• Jurisdiction: Ireland
• Judge: Ms. Justice Baker
• Judgment Date: 08 November 2016
• Neutral Citation: [2016] IEHC 630
• Docket Number: [2013 No. 1182 P]
• Court: High Court
• Date: 08 November 2016

BETWEEN

DOMHNALL MAC A BHAIRD

PLAINTIFF

AND

THE COMMISSIONERS OF PUBLIC WORKS IN IRELAND

DEFENDANTS

(No. 2)

[2016] IEHC 630

[2013 No. 1182 P]

THE HIGH COURT

Contract – Breach of contract – Claim for specific performance – Payment of interest and damages – Double recovery

Facts: The plaintiff had filed the present proceedings seeking declaration that the plaintiff was entitled to interest on the balance of purchase price and damages after the plaintiff had obtained a decree of specific performance of a contract for the sale of certain premises against the defendants. The plaintiff contended that he was entitled to recover the interest accrued from the date of closing to the date of completion of sale. The defendants asserted that since the relevant condition in the general conditions to the agreement between the parties provided for a distinct claim for interest, the present claim was bound to fall.

Ms. Justice Baker granted an award to the plaintiff for contractual interest. The Court held that interest was payable by a purchaser who breached the contract and failed to close the relevant transaction on the agreed date. The Court held that an award of interest was compensatory and it aimed to make good the loss caused to a party for the failure to abide by the contractual terms. The Court, however, declined to make an order for damages to the plaintiff as it would amount to double recovery. The Court found that the plaintiff had not suffered any great loss than the loss of interest and thus, an award of damage would not be appropriate.

JUDGMENT of Ms. Justice Baker delivered on the 8th day of November, 2016.

1 In a judgment delivered on 5th April, 2016, [2016] IEHC 223, I made an order that the plaintiff be entitled to a decree of specific performance of a contract for the sale of certain premises in Glanmire in the County of Cork. This judgment is given in the claim of the plaintiff for interest on the balance of the purchase price, and damages for the defendant's delay in completing the transaction.

2 The defendant denies that the plaintiff is entitled to either interest or damages.

3 By contract for sale made on the 4th November, 2011 the plaintiff agreed for the sale to the defendant of the premises in consideration of the payment of the sum of €862,600. After taking into account the deposit of €86,260, the contract balance is €776,340.

4 Interest is claimed on the balance of the purchase price, and the parties agree that the date from which interest may be claimed is 9th January, 2013, at which point the plaintiff vendor was able, ready and willing to complete the sale.

The claim for interest

5 The statement of claim seeks interest in the following terms:

‘A declaration that the plaintiff is entitled to interest on the balance of the said purchase moneys from the closing date to completion herein.’

6 The contract for sale was made in the form of the Law Society General Conditions of Sale, and general condition 25 sets the basic framework in which the claim for interest is made.

7 General condition 25(a) provides as follows:

‘25. (a) If by reason of any default on the part of the Purchaser, the purchase shall not have been completed on or before the later of (a) the Closing Date or (b) such subsequent date whereafter delay in completing shall not be attributable to default on the part of the Vendor

i. the Purchaser shall pay interest to the Vendor on the balance of the Purchase Price remaining unpaid at the Stipulated Interest Rate for the period between the Closing Date (or as the case may be such subsequent date as aforesaid) and the date of actual completion of the Sale. Such interest shall accrue from day to day and shall be payable before and after any judgment, and

ii. the Vendor shall in addition to being entitled to receive such interest, have the right to take the rents and profits less the outgoings of the Subject Property up to the date of the actual completion of the Sale.

8 The contractual position, then, is that a vendor is entitled to interest only if the delay in closing the sale is caused by a default on the part of the purchaser.

9 In In re Young & Hartson's Contract [1885] 31 Ch. D. 168 Bowen L.J. defined default as follows:

‘Default is a purely relative term, just like negligence. It means nothing more, nothing less, than not doing what is reasonable under the circumstances – not doing something which you ought to do, having regard to the relations which you occupy towards the other persons interested in the transaction.’

10 I have already found that the purchaser was not entitled to rescind the contract, and there is no real dispute between the parties that, subject to the right of the defendant to appeal my judgment decreeing specific performance, the purchaser has been in default.

11 The purchaser argues that general condition 25 provides a distinct and express mechanism by which a claim for interest may be maintained, and that as the plaintiff failed to activate his claim for interest in accordance with the contractual provisions, the claim for interest must fail.

Notice before interest is recoverable: General condition 25(b):

12 The purchaser relies on the provisions of general condition 25 (b) which I quote in full:

‘25. (b) If the Vendor by reason of his default shall not be able, ready and willing to complete the Sale on the Closing Date he shall thereafter give to the Purchaser at least five Working Days prior notice of a date upon which he shall be so able ready and willing and the Purchaser shall not before the expiration of that notice be deemed to be in default for the purpose of this Condition provided that no such notice shall be required if the Vendor is prevented from being able and ready to complete or to give said notice by reason of the act or default of the Purchaser.’

13 ‘Working Days’ and ‘Closing Date’ are defined in general condition 2. The general condition is mandatory in its terms in that it is clear that no liability for interest ‘shall’ accrue before the expiration of the notice. General condition 49 contains provisions to construe the meaning of the word ‘notice’, and the notice must be in writing and served in the manner provided.

14 The purchaser argues that the vendor failed to give notice in accordance with this mechanism.

Discussion

15 No authority has been opened as to the meaning and effect of condition 25(b). This may be because in many conveyancing transactions there will be an amount of correspondence post contract, and the parties will well know in many cases when closing is proposed. I consider that may be one reason why general condition 25(b) does not make any provision for a variation of an agreed later closing date, as is found in 25(a).

16 The purpose of the general condition is to provide a means by which a vendor may unilaterally vary an agreed closing date, as absent such, a vendor could be in breach of contract on account of an inability to close on the agreed date. While time is not of the essence of a contract for the sale of land, the closing date is not an indicative date on which closing is agreed to occur, but a contractual term.

17 The condition provides a mechanism by which the vendor can set another closing date, avoid being in default for failure to be ready to close on the agreed date and fix a date from which interest may be claimed.

18 Because general condition 25(b) is framed by reference to the defined ‘closing date’, and not by reference to a later agreed closing date, it could be said that the general condition has no application in circumstances where the vendor does not wish to avail of the right to unilaterally change the contractual closing date for his own reasons. It would have no application when the parties agree a different closing date from the one expressed in the contract itself. Notice would not have to be given for the interest provisions to be applicable when the closing date is changed by agreement other than by unilateral act of the vendor in reliance on condition 25(b). The vendor never relied on a power to unilaterally change the closing date and instead the parties agreed and varied the date on a number of occasions, as can be seen from the judgment in the substantive case. On that construction of 25(b), I consider that it is not engaged in the present case.

19 In case I am wrong in this analysis, I will examine the arguments of the parties with regard to the condition.

20 The vendor argues that as the purchaser had rescinded, the general condition cannot be applicable, as a requirement of notice is not one contained in a subsisting contract. I do not consider that the vendor is correct. The purchaser did rescind the contract and I have already held that the purchaser did not lawfully do so. The contract continued to subsist, and was actionable. Furthermore, general condition 25 is designed and intended by the parties to be one mechanism by which the parties have agreed as a form of remedy in the event of default. It was intended therefore to be a class of secondary obligation.

21 The purchaser says no document can be identified as having given the required notice.

22 Three documents can be construed as a notice for the purposes of general condition 25(b). The completion notice itself was an express statement by the vendor that he was ready and willing to close. The fact that the vendor was not in a position to close on the expiry of the time fixed by the notice does not in my view make the completion notice ineffective for all purposes. It was a notice by which the purchaser was advised that the vendor was ready and able to close.

23 The vendor gave notice on 9th January, 2013 that he was in a position to close, but as general condition 25(b) requires at least five working days' prior notice the notice is not effective to deal...