Mount Kennett Investment Company v O'Meara and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 09 March 2011
• Neutral Citation: [2011] IEHC 210
• Court: High Court
• Date: 09 March 2011

[2011] IEHC 210

THE HIGH COURT

[No. 1657 P/2005]

Mount Kennett Investment Company & Greenband Investments v O'Meara & Ors

BETWEEN

MOUNT KENNETT INVESTMENT COMPANY AND BY ORDER OF THE COURT GREENBAND INVESTMENTS

PLAINTIFFS

AND

PATRICK O'MEARA, ANTHONY FITZPATRICK AND JOHN TOBIN

DEFENDANTS

GREENBAND INVESTMENTS v BRUTON & ORS UNREP CLARKE 30.1.2009 2009/24/5829 2009 IEHC 67

MOUNT KENNETT INVESTMENT CO v O'MEARA & ORS UNREP SMYTH 21.11.2007 2007/42/8875 2007 IEHC 420

MOUNT KENNETT INVESTMENT CO v O'MEARA & ORS UNREP CLARKE 11.3.2010 (EX TEMPORE)

SPRY THE PRINCIPLES OF EQUITABLE REMEDIES 8ED 2010 319-321

JOHNSON v AGNEW 1980 AC 367 1979 2 WLR 487 1979 1 AER 883

LETT & CO LTD v WEXFORD BOROUGH CORP & ORS UNREP CLARKE 23.5.2007 2007/34/7055 2007 IEHC 195

DIAMOND v CAMPBELL-JONES 1961 CH 22 1960 2 WLR 568 1960 1 AER 583

RATCLIFFE v EVANS 1892 2 QB 524

CHAPLIN v HICKS 1911 2 KB 786

BIGGIN & CO LTD v PERMANITE LTD & ORS 1951 2 KB 314 1951 2 AER 191

DUFFY v RIDLEY PROPERTIES LTD & STOKES 2008 4 IR 282 200815/3221 2008 IESC 23

VICTORIA LAUNDRY (WINDSOR) LTD v NEWMAN INDUSTRIES LTD 1949 2 KB 528 1949 1 AER 997

1. Introduction

2 2 1.1 This case arises out of a plan devised by a Mr. Paul O'Brien to develop a significant shopping centre in Clonmel, now known as "The Showgrounds". The shopping centre concerned is now in place and operational. However, two sets of significant proceedings have arisen out of what are said to have been separate breaches of contract by parties with whom Mr. O'Brien, and companies associated with him, entered into agreements connected with the development of the Showgrounds. These proceedings are one of those two cases. The other case is Greenband Investments v. Bruton & Ors [2008 No. 3677 P] which has been the subject of a previous judgment dated 30 ^th January, 2009, ( [2009] IEHC 67). There is also a further judgment delivered today in those latter proceedings. There is, however, no formal connection between the two sets of proceedings (the contracts which give rise to both proceedings are separate - the defendants are unconnected and there is little or no overlap between the specific facts which are relevant in the respective cases). Nevertheless, the general background to both proceedings is to be found in Mr. O'Brien's plans to develop the shopping centre in question. I propose setting out that general background in this judgment.

3 3 1.2 In any event, these proceedings stem from a contract entered into by the first named plaintiff ("Mount Kennett") with the defendants ("the Vendors" and separately "Mr. O'Meara", "Mr. Fitzpatrick" and "Mr. Tobin") for the purchase of the lands on which the Showgrounds shopping centre was ultimately built ("the showgrounds site"). There have already been two judgments in these proceedings. Mount Kennett maintained proceedings for specific performance of the contract in question against the Vendors. Those proceedings came on for hearing before Smyth J. and were the subject of a judgment given on the 21 ^st November, 2007, ( [2007] IEHC 420). For the reasons set out in that judgment Smyth J. determined that Mount Kennett was entitled to an order for specific performance of the relevant contract.

4 4 1.3 For reasons which it will be necessary to explore in more detail, the contract was not performed or, at least, was not performed in the way contemplated by the decree of specific performance. The problem which gave rise to the issues between the parties stemmed from the fact that the Vendors contracted to sell a fee simple interest in the showgrounds site to Mount Kennett. However, the Vendors, at the time when they entered into that contract, had only a contractual entitlement to purchase the property themselves, which contractual entitlement was conditional on the obtaining of consent from the Commissioners of Charitable Donations and Bequests for Ireland ("Charity Commissioners") to the sale in question. In those circumstances clearly the Vendors took a chance by agreeing, unconditionally, to sell a freehold at a time when they had no more than a conditional contract to buy in that freehold. It should also be noted that there was a significant leasehold interest in the property in question. That lease was held by Clonmel Leisure Group Ltd ("Clonmel Leisure") in which the Vendors had a significant interest but it is also of some note that there was a fourth shareholder in that company, a Mr. Buckley, which fact contributed to some of the difficulties which subsequently emerged. In any event, the Charity Commissioners ultimately refused to consent to the sale in question and the Vendors were, therefore, not in a position to complete. The specific performance proceedings to which I have already referred followed. For the reasons set out in his judgment, Smyth J. was satisfied that the Vendors had it within their capability to complete the sale for he was satisfied that the Charity Commissioners had no objection in principle to the sale in question, but were concerned that the amount being paid for the freehold interest was insufficient. As events proved there was considerable merit in the view taken by the Charity Commissioners on that question.

5 5 1.4 As a result of various transactions Mount Kennett became entitled to acquire the freehold directly from the owner who ultimately secured the consent of the Charity Commissioners. Mount Kennett (of which Mr. O'Brien is a director and a significant but not the only shareholder) sold its interest in its various contracts in respect of the showgrounds site to the second named plaintiff ("Greenband"). Mr. O'Brien is the beneficial owner and a director of Greenband. Greenband thus became entitled to have the freehold interest transferred to it. In addition, in circumstances which it will be necessary to explore in greater detail, the leasehold interest in the showgrounds site was assigned to Greenband. The sale of the freehold to Greenband also completed so that Greenband became the freehold owner.

6 6 1.5 Thereafter, Mount Kennett and Greenband sought to have these proceedings re-entered for the purposes of claiming damages under two broad headings. First, it was said that Greenband ultimately paid significantly more money to secure the freehold in the manner in which I have described than the original contract price. With some allowances and adjustments to which it will be necessary to refer, the first head of claim relates to that additional consideration.

7 7 1.6 Second, Greenband maintains that, as a result of the delay in getting in title to the property, the shopping centre itself was delayed by a year in its opening. A variety of claims under that heading are also maintained.

8 8 1.7 Finally, by way of introduction, it should be noted that the damages hearing initially commenced in March 2010. When counsel for Mount Kennett and Greenband had completed his opening, an application was made by counsel on behalf of Mr. Fitzpatrick (ultimately supported by counsel on behalf of the other Vendors) which sought to have the damages claim dismissed as being not maintainable in the light of the way the case progressed before Smyth J.. Separate argument was addressed relating to respectively damages for delay and damages in lieu of specific performance. For reasons set out in a judgment which I delivered (Unreported, High Court, Clarke J., 11 ^th March, 2010), I came to the view that Mount Kennett and Greenband were not prevented from maintaining a claim for damages for delay. The procedural history of the case from the time when Smyth J. delivered judgment to the initial commencement of the damages hearing is also addressed in that judgment. The respective counsel for the Vendors had also suggested that, in all the circumstances, and having regard to the way in which Greenband ultimately came to own the freehold, it was not open to Greenband to now seek damages in lieu of specific performance. I indicated in an ex tempore ruling at that time that any decision on that question would have to await a full hearing of all the evidence. That issue remains for decision and is dealt with in the course of this judgment.

9 9 1.8 Against that rather complicated background it is necessary to turn first to the issues which now fall to be decided.

2. The Issues

2 2 2.1 As noted above the issues fall into two broad categories. It should first be recalled that all of the contractual entitlements which Mount Kennett had under its contract with the Vendors were transferred to Greenband. The party that incurred the extra cost of acquiring the relevant lands was, therefore, Greenband. Likewise, any additional costs or losses attributable to the delay in title being acquired are losses of Greenband. No issue was raised at the hearing as to the appropriateness of damages being awarded directly to Greenband notwithstanding the fact that Greenband was not, itself, the contracting party with the Vendors.

3 3 2.2 In those circumstances I propose treating this claim as one in which any damages which may be considered appropriate will be awarded to Greenband as the party who suffered any relevant losses.

4 4 2.3 On that basis it can be said that Greenband claims both damages in lieu of specific performance and damages for delay in addition. It is necessary to divide the issues between those two broad categories.

5 5 2.4 So far as damages in lieu of specific performance is concerned there is, as has already been noted, a significant issue between the parties as to whether it is legally permissible for Greenband to now seek damages in lieu of specific performance in the light of the history both of these proceedings and the relevant transactions concerning the acquisition of the freehold. In substance, the Vendors say that Greenband cannot obtain damages in lieu of specific performance...