McGill Construction Ltd v Paul McKeon and Others

• Jurisdiction: Ireland
• Judge: Finnegan P.
• Judgment Date: 19 May 2004
• Neutral Citation: [2004] IEHC 88
• Docket Number: RECORD NO. 9954P/2002
• Court: High Court
• Date: 19 May 2004

[2004] IEHC 88

THE HIGH COURT

RECORD NO. 9954P/2002

HC 188/04

McGILL CONSTRUCTION LTD v. MCKEON & ORS

BETWEEN

McGILL CONSTRUCTION LTD

PLAINTIFF

AND

PAUL McKEON, DECLAN HOGAN, PATRICK BROCK WHITEFIELD CONSTRUCTION LIMITED

AND

PATRICK BROCK & SON LIMITED TRADING AS BROCK BUILDING CONTRACTORS AND BY ORDER OF THE COURT ADRIAN HEGARTY, DAVID TAYLOR AND PATRICK O'DOWD

DEFENDANTS

Citations:

RIVERSTONE MEAT CO V LANCASHIRE SHIPPING CO LTD 1961 1 AER 495

Abstract:

Contract - Sale of land - Damages for breach of contract - Whether there was a concluded oral agreement for the sale of the entire issued share capital in Whitefield Construction Limited

Facts: Whitefield Construction Limited, the fourth named defendant owned lands at Rochestown Avenue, Dun Laoghaire known as Eaglewood. It had obtained planning permission for development of that land, such development consisted of the refurbishment of an existing house and its conversion into apartments, the construction of some town houses and the construction of apartment blocks designated A, B, C, C1, D and E. The development was carried out by Patrick Brock and Sons Limited, pursuant to a contract with Whitefield Construction Limited. When the planning permission was obtained early in 2002 for the development of Eaglewood the shareholders in Whitefield considered the options of selling on the lands or building out. On 4 June, 2002 the shareholders in Whitefield held a meeting at which discussions took place regarding the benefits of disposing of the remainder of Eaglewood to another builder or the option to build out. It was decided at that stage that it would be prudent to investigate both options , that the market for the sale of the lands should be tested and also that projections should be prepared upon the basis of building out. On 11 June, 2003 the first named defendant met with Gerry Tierney who was then a bank manager with Ulster Bank whose branch dealt with the accounts of both the plaintiff and Whitefield. The first named defendant informed Mr Tierney that he was interested in selling Phase 2 of Eaglewood and he requested Mr Tierney to find out whether McGill Construction would be interested in purchasing same. Subsequently, Mr Tierney met with Hugh McGill, a Director of the plaintiff company. At the conclusion of the meeting Hugh McGill informed Mr Tierney that he was interested and that he would pursue the matter. On 19 June, 2002 Shane McGill and Leaonard McGill, on behalf of Hugh McGill met with the first and second named defendants and it was made clear at that meeting by the defendants that the transaction could only proceed by way of a sale of the issued share capital in Whitefield Construction Limited as opposed to a sale and conveyance of the undeveloped portion of Eaglewood. Subsequently, on 24 June Leonard McGill telephoned the first named defendant and offered a sum of €3,500,000. The first named defendant informed him that the offer was unlikely to be acceptable to the shareholders but that he would revert to him. Accordingly, on 26 June, 2002 at a meeting between Shane and Leonard McGill and the first and second named defendants, the first named defendant indicated that the aforementioned offer was unacceptable. Consequently, on 2 July, 2002 Hugh McGill suggested an offer of €3.62 million. The first named defendant gave evidence that he informed Mr McGill that he thought he would be permitted to deal at that level but that he would revert to him following discussions with the other shareholders. However, Hugh McGill submitted that he offered €3,600,000 and that that was accepted by the first named defendant. Hugh McGill submitted that he was satisfied he had a deal and he informed his solicitor, his accountant, Shane and Leonard McGill and Gerry Tierney of that fact. Subsequently, on 14 July, 2002 the plaintiff’s bankers were approached in relation to finance.

The plaintiff alleged that it had concluded an agreement to purchase the entire issued share capital of Whitefield Construction Limited, that the defendants breached the agreement and accordingly it sought damages for breach of that agreement.

Held by Finnegan P. in refusing the relief sought:

1. That the typescript of the notes dictated by the first named defendant represented an accurate record of the meetings and phone calls to which they referred. That was so notwithstanding the circumstance that the manuscript notes upon which they were based were no longer available and that they were dictated at a time when litigation was contemplated.

2. That the plaintiff’s representatives were unaware of the formality and complexity which normally attended the sale of a company which had traded. However, the first and second named defendants being chartered accountants were fully aware of the complexity which attended such a transaction and would have expected such matters to have been dealt with in a written share sale agreement. Furthermore, in the course of telephone conversations, Mr Hugh McGill enquired as to who would prepare the agreements and it was suggested to him that that should be done by the solicitor to the shareholders.

3. That it was unnecessary to resolve the conflict of evidence as to the contents of the telephone conversation that took place between the first named defendant and Hugh McGill on 2 July, 2002. If an agreement was reached at that stage in the terms advanced by Hugh McGill, that agreement related to price only. There were many other matters yet to be agreed and resolved before a concluded agreement could exist. Both parties envisaged a formal agreement of the nature normally involved in the sale of the issued share capital in a company which had traded with warranties and indemnities tailored to meet the circumstances of that particular company. There was no discussion or agreement with regard to a deposit, no consideration was given as to how the taxation liabilities of Whitefield Construction Limited in respect of the development which it had carried out would be dealt with, no closing date was agreed and there was no agreement in relation to the show apartment. All of those matters suggested that there was no concluded agreement.

4. That all that was agreed on 2 July, 2002 was the price which the plaintiff was prepared to pay and the shareholders were prepared to accept and that even if Hugh McGill’s account of the conversation was accepted a great deal more remained to be agreed and reduced to writing. Accordingly there was no concluded agreement between the parties. Furthermore, given that the only agreement reached related to the price at which the parties were prepared to deal, it was clear that there was no intention at that time to create a contractual relationship on either part. The conduct of the plaintiff after 2 July in approaching its bank to arrange finance was also more consistent with the view that an agreement on price only was reached rather than the view that a complete oral agreement had been concluded as that was a matter that one would normally have expected to have been attended to prior to the plaintiff committing itself to a concluded agreement.

Reporter: L.O’S.

Finnegan P.

1 The Plaintiff alleges that it concluded an agreement to purchase the entire issued share capital of Whitefield Construction Limited and while it originally sought specific performance of that agreement in the events that happened the issues which arise for determination are the following:-

2 (1) Whether there was a concluded agreement for the purchase by the Plaintiff of the entire issued share capital in Whitefield Construction Limited.

3 (2) If there was such a concluded agreement damages for breach thereof,

4 (3) If there was no such concluded agreement by reason of want of authority on the part of Paul McKeon the first named Defendant.

5 (a) Was the first named Defendant in breach of a warranty of authority.

6 (b) If so damages in respect of the said breach of warranty of authority.

7 The issued share capital in Whitefield Construction Limited at the relevant time was held as follows: Patrick Brock as to 50% thereof and Paul McKeon, Declan Hogan, Adrian Hegarty, David Taylor and Patrick O'Dowd each as to 10% thereof. Whitefield Construction Limited owns lands at Rochestown Avenue, Dun Laoghaire known as Eaglewood and obtained planning permission for the development of the same the development consisting of the refurbishment of an existing house and its conversion into apartments, the construction of some town houses and the construction of apartment blocks designated A, B, C, C1, D and E. At the time of the events with which I am concerned with the exception of Block A and B the development of Eaglefield had been completed and sales either completed or agreed. The development was carried out by Patrick Brock & Sons Limited, a company effectively controlled by Patrick Brock the third named Defendant pursuant to contract with Whitefield Construction Limited. Patrick Brock & Sons Limited is a long established and experienced building contractor but had not previously been involved in speculative building. For this reason Patrick Brock involved investors in the development and incorporated Whitefield Construction Limited. The first and second named Defendants are chartered accountants. Adrian Hegarty the sixth named Defendant is the Chief Executive Officer of Friends First.

8 When planning permission was obtained early in 2002 for the development of Eaglewood the shareholders in Whitefield Construction Limited considered the options of selling on the lands or building out. Adopting the former course would then have yielded a profit of £400,000 and it was anticipated that the latter course would yield a significantly higher profit and accordingly the latter course was adopted. At that time the Plaintiff had an interest in acquiring Eaglewood and had discussions in relation to so doing...