McGrath v Stewart

• Jurisdiction: Ireland
• Judge: Mr Justice Roderick Murphy
• Judgment Date: 11 November 2008
• Neutral Citation: [2008] IEHC 348
• Court: High Court
• Date: 11 November 2008

[2008] IEHC 348

THE HIGH COURT

10969P/2004

10973P/2004

McGrath v Stewart

BETWEEN

P.J. McGRATH

PLAINTIFF

AND

DEREK STEWART

DEFENDANT

AND

BETWEEN

P.J. McGRATH AND THOMAS McGRATH

PLAINTIFFS

AND

DEREK STEWART

DEFENDANT

BANK OF IRELAND v WALDRON 1944 IR 303

HEALY v FARRAGHER UNREP SUPREME Ó DÁLAIGH 21.12.1972 1966-75/H/2070

IR KBD IN RE POSTMASTER-GENERAL & COLGAN'S CONTRACT 1906 IR 287

CA IN RE POSTMASTER-GENERAL & COLGAN'S CONTRACT 1906 IR 477

MESPIL LTD v CAPALDI 1986 ILRM 373

O'NEILL v RYAN (NO 3) 1992 1 IR 166

FERGUSON v MERCHANT BANKING LTD 1993 ILRM 136

SMELTER CORPORATION OF IRELAND LTD v O'DRISCOLL 1977 IR 305

CURUST FINANCIAL SERVICES LTD v LOEWE-LARK-WERK 1994 1 IR 450

KAVANAGH v CAULFIELD UNREP HIGH MURPHY 19.6.2002 2002/14/3350

H (J) v H (WJ) UNREP HIGH KEANE 20.12.1979 1981/4/591

SPRY PRINCIPLES OF EQUITABLE REMEDIES 5ED 1997 232-3

HORGAN v DEASY 1979 ILRM 71

WHITE v MCCOOEY 1976-7 ILRM 72

DUGGAN v ALLIED IRISH BUILDING SOCIETY UNREP HIGH FINLAY 4.3.1976 1976/3/497

HOLOHAN v ARDMAYLE ESTATES UNREP SUPREME WALSH 1.5.1967 1966-75/H/2163

IN THE MATTER OF FULLER & CO LTD (IN LIQUIDATION) O'CONNOR v MCCARTHY & ORS 1982 ILRM 201

ROBERTS v O'NEILL 1983 IR 47

MALHOTRA v CHOUDHURY 1980 CH 52

EQUITY

Specific performance

Contract for the sale of properties entered into in June 1998 - Order for specific performance sought six years after contracts signed - Whether parties entered into valid contract for sale with vacant possession - Plaintiff unaware that sale subject to tenancies - Duty of vendor to ensure vacant possession - Contractual documentation Bank of Ireland v Waldron [1944] IR 303, Healy v Farragher (Unrep, SC, 21/12/1972) and Re Postmaster-General and Colgan's Contract [1906] 1 IR 287 considered - Law Society General Conditions of Sale, 1988, condition 21 - Mistake - Consensus ad idem - Whether parties entered into valid contract. - Whether defendant's mistaken understanding of agreement justified - Mespil Ltd v Capaldi [1986] ILRM 373, O'Neill v Ryan (No 3) [1992] IR 166 and Ferguson v Merchant Banking Ltd [1993] 1 ILRM 136 considered - Discretionary remedy - Clean hands - Whether plaintiff acted otherwise than in good faith - Prudent purchaser - Contract price far below the market value - Whether plaintiff's omissions involved any element of moral turpitude - Smelter Corporation v O'Driscoll [1977] IR 305, Curust Financial Services Ltd v Loewe Lack-Werk [1994] 1 IR 450 and Kavanagh v Caulfield (Unrep, Murphy J, 19/6/2002) considered - Laches - Lapse of time - Inequitable circumstances - Increasing value of the properties - Explanation advanced for the delay - Financial hardship on defendant - JH v WJH (Unrep, Keane J, 20/12/1979) and Horgan v Deasy [1979] ILRM 71 followed - Damages in lieu of specific performance - How damages quantified - Loss of bargain - General rule - Whether plaintiff profiting substantially from own failure to act promptly - Relevant date for the assessment of damages - Applicable rules - White v McCooey [1976- 77] ILRM 72, Duggan v Allied Irish Building Society (Unrep, Finlay J, 4/3/1976), Holohan v Ardmayle Estates (Unrep, SC, 1/5/1967), O'Connor v McCarthy [1982] ILRM 201, Roberts v O'Neill [1983] IR 47 and Malhotra v Choudhury [1980] 1 Ch 52 considered - Decree of specific performance refused on ground of laches; damages in lieu of specific performance awarded (2004/10969P - Murphy J - 11/11/2008) [2008] IEHC 348

McGrath v Stewart

Facts: A dispute arose between the plaintiff and defendant in respect of the sale of three premises and whether specific performance of the agreement was possible. The defendant held the legal title of the premises and was the solicitor for the owner of the premises who held the beneficial interest. The plaintiff had insisted on vacant possession at sale. A confrontation allegedly arose between the parties which was contended by the plaintiff to have intimidated him so as not to exercise his legal rights and thus explained the delay invoked by the defendant as laches. The issue also arose as to whether the defendants mistaken understanding of the agreement was justified.

Held by Murphy J. that the plaintiff had contracted for the acquisition of all properties without tenants. Objectively, it could not be said that the defendants understanding of the agreement was justified. The maxim that he who came to equity had to come with clean hands applied here. The plaintiff had had no reason to suspect that the properties were tenanted. A substantial delay ensued from 1998 when the contract was entered into and 2004 when the proceedings were instituted. The defence of laches had to succeed as it would have been inequitable if it did not apply here. Damages would be awarded in lieu of specific performance as the court was entitled to so do. From the market value in 2005, the contract price of the properties would be subtracted and the deposit of the plaintiff would be returned.

Reporter: E.F.

1 Mr Justice Roderick Murphy delivered on the 11th day of November, 2008.

1. Background to the proceedings

2 This is an application for a decree of specific performance of a contract for the sale of land entered into on 8th June 1998, between the plaintiff in the first action as purchaser and the defendant as vendor, of 9 and 13 Summerhill Place and 14 Rutland Street. The sale of number 13 was closed on 9th October 1998. These proceedings concern the remaining two.

3 The closing date fixed by the contract was 23rd July, 1998. The defendant held the legal title of the premises and was at all material times the solicitor for Mr. Matthew Kelly, the owner of the beneficial interest in all three premises. Earlier in 1998 the defendant had agreed to sell those premises to Mr. Black, a man Mr. Kelly knew and trusted. Mr. Kelly and the defendant gave evidence that they informed Mr. Black in pre-contract discussions that the sale of 9 Summerhill Place and 14 Rutland Street were subject to existing tenancies. Mr Black's evidence was that he had been so informed. The third property, 13 Summerhill Place, was derelict and untenanted. Its purchase price was £22,500, being less than the price of the two tenanted properties, for each of which a sum of £25,000 was to be paid.

4 It was understood that Mr. Black would not close the sale of the properties and he or a Mr. Maher would instead find an interested buyer for them. He discussed the matter with Mr. Maher, who arranged to purchase the properties. Mr. Maher in turn arranged for the plaintiff to purchase the properties and to pay a finder's fee in addition. The plaintiff's solicitor received the contracts signed by the defendant as vendor and indicating Mr. Black as purchaser. Mr. Black did not sign the contract. He tried to find another purchaser and expected to be paid a finder's fee for so doing. His name was erased with Tipp- ex and the plaintiff's name was inserted. The contracts were returned to the defendant signed by the plaintiff in trust. Mr. Black was paid a fee of £4,000. Mr Maher, who also gave evidence, was paid a similar fee. The plaintiff's evidence was that he was unaware that the sale was to be subject to tenancies. The plaintiffs' solicitor raised requisitions on title with the defendant on 25th June 1998, inquiring, inter alia, whether vacant possession of the property would be given. A legal executive employed by the defendant replied to the requisitions by referring to the tenancies. The plaintiff insisted on vacant possession, but the defendant was not prepared to close the sale on that basis. By letter dated 18th September, 1998, the plaintiff's solicitors suggested that a sum of £10,000 be placed on joint deposit to secure vacant possession. The defendant was not agreeable to this, but closed the sale of the vacant property, 13 Summerhill Place, on 9th October, 1998. On that date, he swore a statutory declaration in relation to all three properties concerning leases to which they were subject. However, the two tenanted properties remained with the defendant after that date. On 3rd November, 1998, the plaintiff's solicitors wrote to the defendant's firm seeking confirmation of the current position on the issue of vacant possession and expressing the plaintiff's eagerness to proceed. By letter of 28th March, 1999, the plaintiff's solicitors again raised the issue of completion with the defendant. Another letter of 23rd May, 2000, again sought confirmation of the position regarding vacant possession and noted the plaintiff's desire to close the sale. No response was received to any of these letters.

5 On 30th April, 1999, almost 11 months after the signing of the contract, Mr. Kelly went to the plaintiff's office to confront him. The plaintiff and his sister gave evidence that he threatened both of them. Mr. Kelly, in his evidence, agreed that the conversation was heated. He informed the plaintiff that he was the beneficial owner of the property and that he would not see it pass to the plaintiff without the tenants remaining in residence. The plaintiff said that he decided to wait until the properties were vacant before pursuing the matter further, hoping not to antagonise Mr. Kelly. Five years later he became aware, in June, 2004, that the property was vacant. On 11th June, 2004, his solicitor issued a 28-day Completion Notice requiring the defendant to close the sales. Mr. Kelly instructed his solicitor to ignore the notice. The present proceedings were instituted on 15th July, 2004, over six years after the signing of the contract.

2. The extent of the interest conveyed

6 In a conveyance of freehold land it is the duty of the vendor at common law to ensure the purchaser will have clear vacant possession of the entire property on completion: Bank of Ireland v. Waldron [1944] I.R. 303 at 305. The parties...