Ringsend Property Ltd v Donatex Ltd and Bernard McNamara

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 18 December 2009
• Neutral Citation: [2009] IEHC 568
• Court: High Court
• Date: 18 December 2009

Ringsend Property Ltd v Donatex Ltd & McNamara

COMMERCIAL

BETWEEN

RINGSEND PROPERTY LIMITED

PLAINTIFF

AND

DONATEX LIMITED AND BERNARD MCNAMARA

DEFENDANTS

[2009] IEHC 568

[No. 4379 S/2009]

[No. 367 COM/2009]

THE HIGH COURT

PRACTICE & PROCEDURE

Summary judgment

Leave to defend - Whether arguable defence disclosed - Test applicable - Frustration of contract - Whether partial frustration applicable - Implied terms - Test applicable - Mistake of law - Test applicable - Aer Rianta cpt v Ryanair Ltd [2001] 4 IR 607, First National Commercial Bank plc v Anglin [1996] 1 IR 75, Davis Contractors Ltd v Fareham UDC [1956] AC 696, Associated Japanese Bank (International) Ltd v Credit du Nord SA [1989] 1 WLR 255 and Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 considered - Dublin Docklands Development Authority Act 1997 (No 7), s 25 - Summary judgment granted (2009/4379C & 367COM - Kelly J - 18/12/2009) [2009] IEHC 568

Ringsend Property Ltd v Donatex Ltd

Facts The second named defendant held a 41% share through the first named defendant, which was his company, in another company which purchased the entire share capital of South Wharf Plc. In order to finance the second defendant's share of the equity contribution to the purchase the first defendant issued loan stock. Ultimately that loan stock was transferred to the plaintiff. The loan stock agreement provided for the stock becoming immediately redeemable in certain circumstances resulting in accelerated repayment to the investors. Clause 5.1.19 provided that if the purchaser did not apply for all necessary s. 25 certificates from DDDA or alternatively received any planning permission from Dublin City Council for the commencement of the development within 30 months of the date of this deed then the issued stock became immediately redeemable. It was common case that no s. 25 certificates or planning permission was obtained and 30 months had elapsed. Consequently, the plaintiff claimed that it was entitled to have the loan stock redeemed and be paid €98,145,905. The defendants claim that they have shown an arguable defence sufficient to resist this application for summary judgment and rely on four lines of defence. The defendants submitted that the plaintiff failed to comply with the provisions of the loan stock instrument because it did not seek to redeem by the surrender of certificates as per clause 4, but simply made a demand for payment. The defendants sought to avoid the provisions of s. 5.1.19 by invoking the doctrine of frustration based on an argument that the DDDA was incapable of issuing a section 25 certificate and Dublin City Council was not permitted to grant planning permission having regard to the decision of Finlay Geoghegan J. in North Wall Property Holding Company Limited v. Dublin Docklands Development Authority [2009] IEHC 11. The defendants also sought to rely on the defence of mistake of law. Lastly, the defendants sought to have implied into clause 5.1.19 a term to the effect that the DDDA had the legal possibility of operating the section 25 mechanism.

Held by Kelly J. in granting summary judgment: That the letter of demand from the plaintiff, coupled as it was with a clear statement that the loan stock certificate would be surrendered for cancellation at the same time as payment of the amount outstanding was made was perfectly in order. There was no arguable defence under this heading. The doctrine of frustration had a very narrow scope. In any event even if the defence of frustration was made out by the defendants, the contractual obligations were at an end and in those circumstances the plaintiffs would be entitled to repayment of the monies advanced. Consequently, even if successful in invoking the doctrine the defendants remained liable to immediately reply the funds advanced and so the defence availed them nothing. No arguable defence under mistake of law was made out by the defendants. There was no basis for implying the term sought by the defendants as the whole loan stock instrument were perfectly workable and efficacious from a business point of view. In any event, the judgement of Finlay Geoghegan J. relied upon by the defendants did not have the wide implications as argued for by the defendants. No arguable defence was made out and the monies must be repaid.

Reporter: L.O'S.

DUBLIN DOCKLANDS DEVELOPMENT AUTHORITY ACT 1997 S25

FIRST NATIONAL COMMERCIAL BANK PLC v ANGLIN 1996 1 IR 75 1996/11/3337

AER RIANTA CPT v RYANAIR LTD 2001 4 IR 607 2002 1 ILRM 381 2001/1/68

DANSKE BANK (T/A NATIONAL IRISH BANK) v DURKAN NEW HOMES & ORS UNREP CHARLETON 26.6.2009 2009 IEHC 278

NORTH WALL PROPERTY HOLDING CO LTD & DUNNE v DUBLIN DOCKLANDS DEVELOPMENT AUTHORITY UNREP FINLAY GEOGHEGAN 20.1.2009 2009 IEHC 11

DAVIS CONSTRUCTORS LTD v FAREHAM URBAN DISTRICT COUNCIL 1956 AC 696 1956 3 WLR 37 1956 2 AER 145

WILLIAM NEVILLE & SONS LTD v GUARDIAN BUILDERS LTD 1995 1 ILRM 1 1994/12/3725

BEALE & BURROWS & FREEDLAND CHITTY ON CONTRACTS 30ED 2008 PARA 23.003

TREITEL THE LAW OF CONTRACT 11ED 2003 PARA 50.07

KLEINWORT BENSON LTD v LINCOLN CITY COUNCIL 1999 2 AC 349 1998 3 WLR 1095 1998 4 AER 513

ASSOCIATED JAPANESE BANK (INTERNATIONAL) LTD v CREDIT DU NORD SA 1988 3 AER 902 1989 1 WLR 255

THE MOORCOCK, IN RE 1889 14 PD 64 1886-90 AER REP 530

GOLDEN STRAIT CORP v NIPPON YUSEN KUBISHIKA KAISHA 2007 2 AC 353 2007 2 WLR 691 2007 3 AER 1

VALLEJO v WHEELER 1774 1 COWP 143 1558-1774 AER REP 411 98 ER 1012

CHARTBROOK LTD v PERSIMMON HOMES LTD 2009 3 WLR 267 2009 1 AC 1101 2009 4 AER 677

1 Mr. Justice Kelly delivered on the 18th day of December, 2009

Background

2 This case was spawned by the purchase for in excess of €410,000,000 of the Irish Glass Bottle plant in Ringsend, Dublin 4. Those premises, which were owned by a company called South Wharf Plc, were bought by a consortium consisting of the Dublin Docklands Development Authority (DDDA), the second defendant (Mr. McNamara) and Derek Quinlan.

3 The purchase was effected by a company called Becbay Limited (Becbay) buying the entire share capital of South Wharf Plc. The plaintiff tells me that the purchase took this form in order to avoid paying the stamp duty which would have been exigible on a straightforward sale of land.

4 Each of the members of the consortium holds part of the share capital of Becbay. Mr. McNamara holds 41% of its capital through the first defendant which is his company. Mempal Limited representing the Quinlan interest holds 33% of Becbay. DDDA holds the remaining 26% of Becbay.

5 In order to finance Mr. McNamara's share of the equity contribution to the purchase of the Ringsend plant the first defendant issued loan stock. That loan stock offered the prospect of a very good return to investors. There was to be 14% annual interest and a 3% redemption premium payable to them.

6 Davy Stockbrokers were retained for the purpose of marketing the investment proposal. Davy did so by the use, inter alia, of an information memorandum dated November 2006. That document spoke about the transaction offering "the opportunity of participating with one of the most prolific and successful developers in the country in the development of the largest and most high profile property to become available in Dublin 4 for decades".

7 The information memorandum made it clear that no planning permission was in existence in respect of the proposed development. The memorandum said that the DDDA had "confirmed that they will seek to have Section 25 of the Planning Acts applied to the site. If successful, this means that the development of the site will be an exempt development for the purposes of the Planning Acts".

8 The information memorandum also made it clear that neither the information contained in it nor the fact of its distribution were to form the basis of any contract.

9 The terms on which investors subscribed for the loan stock are contained in an agreement of 29 ^th January, 2007. It is called a "Loan Stock Instrument constituting €62,550,000, 14% secured redeemable loan stock" (the loan stock instrument). Under it, the investors subscribed for a total of €62,550,000 in loan stock of the first defendant.

10 The stock issued by the first defendant was held by Davy Property Holdings Limited as trustee and agent of the stockholders. By a transfer agreement of 18 ^th September, 2008, the loan stock was transferred from that company to Davy Estates Limited. By loan stock transfer agreement of 27 ^th March, 2009, the loan stock was transferred from Davy Estates Limited to the plaintiff which is a company registered in Jersey. The transfer of the loan stock to the plaintiff was registered by the first defendant on 24 ^th July, 2009 and a loan stock certificate was issued by the first defendant to the plaintiff in the plaintiff's name on 24 ^th July, 2009. It follows that the plaintiff acts as security trustee, trustee and agent of the stockholders and holds the stock on their behalf. Furthermore, the first defendant is entitled to communicate with the plaintiff and deal solely with it in relation to that defendant's obligations under the loan stock instrument.

11 It was envisaged that the investment would have a lifetime of seven years. But the loan stock instrument provided for the stock becoming immediately redeemable in certain circumstances resulting in accelerated repayment to the investors. It is that provision of the loan stock instrument which is pertinent to this application for summary judgment.

Accelerated Repayment

12 Clause 5 of the loan stock instrument is headed "Accelerated Repayment". Clause 5.1 is headed "Immediate Payment". It provides that the issued stock "shall become immediately redeemable on the happening at anytime of the any of the following events". It then sets out a whole...