Redfern Ltd (plaintiff) v O' Mahony & Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Brian J. McGovern
• Judgment Date: 29 June 2010
• Neutral Citation: [2010] IEHC 253
• Court: High Court
• Date: 29 June 2010

Redern Ltd v O'Mahony & Ors

COMMERCIAL

BETWEEN

REDFERN LIMITED

PLAINTIFF

AND

LARRY O'MAHONY AND THOMAS MCFEELY

FIRST AND SECOND DEFENDANTS

AND

BY ORDER OF THE COURT LIAM CARROLL, TAFICA LIMITED AND AIFCA LIMITED

THIRD, FOURTH AND FIFTH DEFENDANTS

[2010] IEHC 253

[No. 5269 P/2007]

THE HIGH COURT

CONTRACT

Interpretation

Enforceability - Intention of parties - Frustration - Repudiation - Breach of contract - Failure to perform contract - Completion date - Subsequent agreement - Incompatibility of two agreements - Parole evidence rule - Development of shopping centre - Rescission - Planning permission - Licence - Incorporation - Separate legal entity - Agency - Whether enforceable legally binding agreement - Whether time was of essence - Whether agreement lapsed - Whether agreement terminated, rescinded or frustrated - Whether necessity to purchase licence frustrated agreement - Whether intended to create legal relations - Whether agreement subsisted at time of subsequent agreement - Whether subsequent agreement had effect of interfering with performance of initial agreement - Whether subsequent agreement subject to initial agreement - Whether agency or trust existed - Analog Devices BV v Zurich Insurance Company [2005] 1 IR 274; Investors Compensation Scheme Ltd v West Bromich Building Society [1998] 1 WLR 896; Emo Oil Ltd v Sun Alliance and London Insurance plc [2009] IESC 2; UPM Kymmene Corporation v BWG Ltd (Unrep, HC, Laffoy J, 11/6/1999); Hynes Ltd v Independent Newspapers Ltd [1980] IR 204; Hare v Nicoll [1966] 2 QB 130; Morris v Baron [1918] AC 1; British & Benningtons Ltd v Northwestern Cachar [1923] AC 48; Headfort v Brocket [1966] IR 227; National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675; J Lauritzen AS v Wijsmuller BV [1990] 1 Lloyds Rep 1; Salomon v Saloman [1897] AC; Allied Irish Coal Supplies Ltd v Powell Duffryn International Fuels Ltd [1998] 2 IR 519 and Fyffes plc v DCC plc [2009] 4 IR 417 considered - Local Government Act 2001 (No 37), s 183 - Claim dismissed (2007/5269P - McGovern J - 29/6/2010) [2010] IEHC 253

Redfern Ltd v O'Mahony

Facts: The plaintiff company, "Redfern", was the sole beneficial shareholder in Alburn, an unlimited liability company. The plaintiff and Alburn were at all times under the control of Mr. Noel Smyth, a property developer. Mr. Smyth was involved in the development of the The Square, Tallaght. Mr. Carroll, the third named defendant was a property developer also. The second and third defendants controlled a company Aifca Ltd. The proceedings arose out of plans to redevelop the The Square. The plaintiff and the first and second defendants were a Partnership and entered the Refern Agreement in 2005, to carry out the development. The completion date for the Agreement was 2005 and then extended to a later date in 2005 but no further extension was ever agreed between the parties. The Partnership entered an agreement with the third named defendant, the Aifca Agreement, to obtain finance assistance without the knowledge of the plaintiff or Alburn. The plaintiff commenced the proceedings for specific performance of the Redfern Agreement but at the hearing solely maintained an entitlement to damages. The plaintiff claimed inter alia that the first, second and fifth defendants were in breach of the Redfern Agreement and that the first and second defendants were in breach of their fiduciary duties to the plaintiff. The issues for the Court to consider included whether there was a legally binding agreement between the plaintiff and the first and second named defendants, given its drafting and terms and the context thereafter, whether or not they had failed to perform it, whether there was a secret agreement which affected the performance of the contract, whether the third, fourth or fifth named defendants procured a breach of contract and whether damages were appropriate.

Held by McGovern J. that by entering into the Redfern Agreement, the parties intended to enter legal relations. The Agreement contained some fundamental errors of fact and omitted to deal with certain issues necessary to carry it into effect in respect of a recital referring incorrectly to the ownership of the share capital which was owned by a separate legal identity, Aifca Ltd and not the Partnership, as drafted. The drafters of the Agreement had to bear the consequences of this fundamental error. There were other problems as to enforceability. The conduct of the parties after the execution of the Agreement and their execution of the later Agreement which they believed to be legally binding had the effect of rescinding the Redfern Agreement. In setting a completion date, the parties made time of the essence. The extension of the time limit for completion, which was complied with, and the failure of the parties to act further thereafter rendered the Agreement unenforceable thereafter as it had lapsed. The secret attempt by Mr. Smyth/ Alburn to buy out the BOSI loan without the other parties knowing it was in breach of the Redfern Agreement and a repudiation of it as were separate bids to buy out the Quinlan units. The conduct of the first and second named defendants in negotiating with the third named defendant without the knowledge of the plaintiff or Mr. Smyth or Alburn was in breach of the good faith provisions of the Redfern Agreement. A number of matters took place after the contract which had the effect of frustrating it, such as relating to the UCI licence, the resolution by SDCC and the provisions for finance. The Redfern Agreement was thus unenforceable. The plaintiff had failed to establish a breach of contract or procurement of a breach of contract and the action would be dismissed.

Reporter: E.F.

LOCAL GOVT ACT 2001 S183

ANALOG DEVICES BV & ORS v ZURICH INSURANCE CO & ANOR 2005 1 IR 274 2005 2 ILRM 131 2005/2/242 2005 IESC 12

INVESTORS COMPENSATION SCHEME LTD v WEST BROMWICH BUILDING SOCIETY 1998 1 WLR 896

EMO OIL LTD v SUN ALLIANCE INSURANCE PLC UNREP KEARNS 22.1.2009 2009 IESC 2

UPM KYMMENE CORP v BWG LTD UNREP LAFFOY 11.06.1999 1999/24/7894

ANALOG DEVICES BV & ORS v ZURICH INSURANCE CO & ANOR 2002 1 IR 272 2002 2 ILRM 366 2002 1 187

HYNES LTD v INDEPENDENT NEWSPAPERS LTD 1980 IR 204

HARE v NICOLL 1966 2 QB 130

CHITTY ON CONTRACTS 29ED 22-028

MORRIS v BARON & CO 1918 AC 1

BRITISH & BENNINGTONS LTD v NORTHWESTERN CACHAR 1923 AC 48

MORRIS v BARON & COMPANY 1918 1 AC

HEADFORT v BROCKET 1966 IR 227

CHITTY ON CONTRACTS 29ED 23-001

NATIONAL CARRIERS LTD v PANALPINA (NORTHERN) LTD 1981 AC 675

LAURITZEN AS v WIJSMULLER BV (SUPER SERVANT TWO) 1990 1 LLOYDS REP 1

CHITTY ON CONTRACT 29ED 23.007

SALOMON v SALOMON & CO 1897 AC 22

ALLIED IRISH COAL SUPPLIES LTD v POWELL DUFFRYN INTERNATIONAL FUELS LTD 1998 2 IR 519

FYFFES PLC v DCC PLC 2009 2 IR 417

1 JUDGMENT of Mr. Justice Brian J. McGovern delivered on the 29th day of June, 2010

2 1. The plaintiff ("Redfern") is a limited liability company registered under the laws of Jersey and, at all material times, was the sole beneficial shareholder in Alburn, a company with unlimited liability ("Alburn"). The plaintiff and Alburn were, at all material times, under the control of Noel Smyth who formerly practiced as a solicitor but who has, for some years, been carrying on business as a property developer. The first and second named defendants, collectively referred to as "the Partnership" are businessmen and developers. They have been involved in a number of joint ventures together and have also carried on their business from time to time, independently of each other. The third named defendant is a businessman and developer. The fourth named defendant, Tafica Ltd. ("Tafica") is a limited company incorporated under the laws of the State and is controlled by the third named defendant. The fifth named defendant, Aifca Ltd. ("Aifca") is a company registered under the laws of the State and, at all material times, was under the control of the first and second named defendants.

3 2. Mr. Noel Smyth, who controls Alburn, has been involved in the development of The Square, Tallaght, since its beginning. Companies over which he has control hold a significant portfolio of properties in The Square. Mr. Liam Carroll, the third named defendant, is a property developer. For some years, he has been involved in developments at Tallaght. In particular, he developed the buildings known as "Glashuas" and "Tallaght Cross" which compete with The Square, both for retail tenants and also for office tenants and residential purchasers.

4 3. These proceedings arise out of plans to redevelop the shopping centre known as "The Square" in Tallaght, County Dublin. It was proposed that the redevelopment of The Square would enlarge the footprint of the buildings on the existing site so that areas of the existing car park would be built upon. The car parks surrounding the shopping centre at The Square are subject to a number of licences, and in order to enable the redevelopment to proceed, it was necessary that the parties wishing to carry out the redevelopment would purchase these licences and/or extinguish them.

5 4. Redfern is the holding company of Alburn, an. Irish unlimited company. In July 2003, Alburn sought to embark upon the redevelopment of The Square. The project was to proceed on the basis of a development in two phases, namely, Phase III and Phase IV, most of which was to take place on the surface car park area surrounding to existing shopping centre. This surface car parking area was approximately 18.5 acres. For that purpose, Alburn entered into negotiations with the Square Management Limited ("SML"), and in July 2003, concluded a joint venture agreement with SML ("the SML Agreement"). Under this agreement, Alburn was required to acquire a licence held by an adjoining owner in respect of...