Stephen Moffitt Ltd and Another v Carl Scarpa Group Ltd and Another

• Jurisdiction: Ireland
• Judge: Ms. Justice Laffoy
• Judgment Date: 08 June 2012
• Neutral Citation: [2012] IEHC 227
• Court: High Court
• Docket Number: [No. 4465P/2006]
• Date: 08 June 2012

[2012] IEHC 227

THE HIGH COURT

[No. 4465P/2006]

Stephen Moffitt Ltd & Carl Scarpa (Grafton Street) Ltd v Carl Scarpa Group Ltd & Siggins

BETWEEN

STEPHEN MOFFITT LIMITED AND CARL SCARPA (GRAFTON STREET) LIMITED

PLAINTIFFS

AND

CARL SCARPA GROUP LIMITED AND GEORGE BRIAN SIGGINS

DEFENDANTS

DOOLAN v MURRAY & ORS UNREP KEANE 21.12.1993 1994/2/414

BENTLEY (DICK) PRODUCTIONS LTD v HAROLD SMITH (MOTORS) LTD 1965 1 WLR 623

MCMAHON & BINCHY THE LAW OF TORTS 3ED PARA 35.10

HEDLEY BYRNE & CO LTD v HELLER & PARTNERS LTD 1964 AC 465

PLANNING & DEVELOPMENT ACT 2000 S4(1)(H)

PLANNING & DEVELOPMENT ACT 2000 S57(1)

LOCAL GOVERNMENT (PLANNING & DEVELOPMENT) ACT 1963 S5

PLANNING & DEVELOPMENT REGULATIONS SI 600/2001 S5

CONTRACT LAW

Breach

Fraudulent misrepresentation - Deceit - Undertaking - Failure to honour undertaking -Whether false representation- Whether deceit - Whether breach of contract regarding planning requirements - Whether breach of contract regarding compliance with building regulations and fire safety requirements - Doolan v Murray (Unrep, Keane J, 21/12/1993) considered - Finding of breach of contract (2006/4465P - Laffoy J - 8/6/2012) [2012] IEHC 227

Stephen Moffitt Ltd v Carl Scarpa Group Ltd

Facts The first named plaintiff purchased the leasehold interest in premises from the defendants. The premises had been merged with another unit and it was intended that the premises would be revert to a single unit. Issues arose after the premises had been acquired as to whether the premises complied with all relevant planning and building regulations and also as to whether any works which had been carried out required a fire safety certificate. As part of the transaction €50,000 had been placed on joint deposit between the parties to be held pending the furnishing of Architect's certificate of compliance. The plaintiffs instituted proceedings in relation to the failure to procure the certificate of compliance and contended that the matters in dispute were either an express or an implied term of the original purchase agreement. The plaintiffs had relied upon representations made by the defendants who had been negligent, guilty of fraudulent misrepresentation and in breach of contract in making same. The defendants contended that they had advised the plaintiffs that further additional works were required to be carried out and that the defendants had been at all times willing to carry out those works but the plaintiffs had failed to agree to this and should be estopped from claiming relief.

Held by Laffoy J in finding the following: The plaintiffs had not proved, on the balance of probabilities, that, when the defendants had undertaken to furnish the certificate of compliance, that the representation was false or that they were reckless as to its truth. The reality of the situation was that the plaintiff was eager to acquire the business in question and had been in pursuit of it for a number of years. Insofar as the defendants had not honoured the commitment given in the undertaking, they were in breach of an express term in the contract but had no liability in tort for deceit or for negligent misstatement. The defendants had not complied, and were not in a position to comply with the undertaking to furnish an architect's certificate of compliance. A common-sense approach would be for the parties to make an application for a fire safety certificate on a basis which was likely to be successful but which involved the least adverse impact on the premises. The defendants were liable for the breach of contract while the plaintiffs had an obligation in law to mitigate their loss. After the parties had considered the judgment, the court would re-list the matter for further submissions.

Ms. Justice Laffoy

1 2 1.1 These proceedings arise out of a transaction in 2005 under which the first plaintiff (Moffitt) acquired by purchase the entire issued share capital in the second plaintiff (the Company) from the defendants. At the time the Company carried on the business of shoe retailer at No. 25 Grafton Street in the City of Dublin (No. 25) and that trade continued after the purchase. The Company's title to No. 25 was derived from a lease dated 31^st January, 1999 made between John Simon and others of the one part and the Company of the other part (the Lease), whereby the premises therein described as "the shop including the roof at the rere thereof and basement of the house known as Number Twenty Five Grafton Street Situate in the Parish of St. Ann in City of Dublin" were demised to the Company for the term of twenty five years from 25^thMarch, 1996 at an initial yearly rent of IR£60,000. After the change of ownership of its share capital, the Company remained in possession of the ground floor and basement of No. 25 and continued its shoe retail business there.

2 3 1.2 The acquisition of the entire issued share capital in the Company by Moffitt from the defendants was one of a number of transactions whereby Moffitt acquired various retail outlets and the business associated with the Carl Scarpa brand. In relation to most of the retail outlets apart from No. 25, as I understand the position, the acquisition was effected by Moffitt taking an assignment of an existing leasehold interest. It is clear on the evidence that there were good reasons why the transaction in relation to No. 25 was effected by the acquisition of the Company, which are not material to the issues the Court has to determine.

3 4 1.3 The solicitors on record for the plaintiffs in these proceedings, McKeever Taylor, acted in the transaction for Moffitt, as the purchaser of the shares in the Company, and a solicitors' firm based in Galway, Kieran Murphy & Co. (Murphy), acted for the defendants, as the vendors in the transaction. Since 7^th March, 2007, the firm Ronan Daly Jermyn (RDJ) has acted for the defendants in these proceedings.

4 5 1.4 The purchase of the shares in the Company by Moffitt was effected by a Share Purchase Agreement dated 8^th August, 2005 (the SPA) made between the defendants of the first part, Moffitt of the second part and the Company of the third part. I think it is true to say that the format of the SPA was typical of the format usually adopted for a share purchase agreement, containing the usual type of warranties and indemnities which one would expect in circumstances where a trading company was being acquired. The SPA discloses that the first defendant (Group) owned seventy five per cent of the issued share capital of the Company and the second defendant (Mr. Siggins) owned the remaining twenty five per cent. The SPA, in defining the expression "warrantor", provided that the defendants should be liable as warrantors on a several basis in the same proportions.

5 6 1.5 In the lead up to the execution of the SPA, McKeever Taylor investigated the Company's title to No. 25. By letter dated 12^th July, 2005 the documentary evidence of title in relation to No. 25 was requested by them and also planning documents, to include the relevant architect's opinions on compliance with planning permissions and building regulations and a copy of "any relevant Fire Safety Certificates". On the following day, 13^th July, 2005, Murphy furnished to McKeever Taylor copies of the Lease and of a planning permission dating from 1989 and an architect's certificate also dating from 1989. The letter contained the following statement:

"No further or other evidence will be furnished and [Mr. Siggins] will warrant only that the Company holds the property in accordance with these documents and there will be no absolute warranties as to good and marketable title, compliance with statutory and regulatory requirements, etc".

6 This led to queries in a letter of 14^th July, 2005 from McKeever Taylor, which were responded to on 15^th July, 2005 by Murphy. Two of the matters raised, which are relevant to the issues in these proceedings, were raised and responded to in the following terms:

7 (a) There was a query whether the property (No. 25) had been subject to any "development", other than the development to which the 1989 planning permission related, and, if so, the relevant planning permission, commencement notice and architect's opinion on compliance were sought. While the response was a bit unclear, I assume that the message it was intended to convey was that there was no other planning permission, which was not correct.

8 (b) There was a query whether or not any works had been carried out which "require a Fire Safety Certificate". The garbled, and as was acknowledged by the defendants' advisers long after the transaction was completed, the incorrect response was:

"There was some question that a Fire Safety Certificate may be required for Numbers 24 and 25 comprised a single outlet but this is not now the case".

9 Murphy pointed out that, while their client had agreed to deal with the matter by way of "Share Sale", this was expressly "on the basis that there would be no warranties or indemnities given by our client personally".

10 7 1.6 Subsequently, on 4^th August, 2005, McKeever Taylor submitted requisitions on title in the Law Society standard form (2001 Edition). The replies furnished by Murphy were dated 8^th August, 2005, which was the date on which the parties met for completion of the SPA. Standard requisitions were raised in relation to the Building Control Act 1990 (the Act of 1990) and the regulations made thereunder. In response thereto Murphy stated:

"See Disclosure Letter - no warranties or representations".

11 The responses to the standard requisitions in relation to planning matters were, it is not unfair to say, uninformative, and in one respect unintelligible. However, what was represented by Murphy in relation to both the planning and building regulation status of No. 25 was overtaken by events at the...