High Court of Ireland Decisions

1. The Defendants seek by the motion dated the 20th October, 1998 to have the Plaintiffs' Statement of Claim struck out in its entirety. They seek this order pursuant to the provisions of Order 19 Rule 28 of the Rules of the Superior Courts and under the inherent jurisdiction of this Court.

2. Order 19 Rule 28 reads as follows:

3. Quite apart from this rule, the Court also has an inherent jurisdiction to stay proceedings if they are frivolous or vexatious or if they put forward a claim which must fail. It is this inherent jurisdiction which has been relied on to some considerable extent by the Defendants in this application, although I propose to deal with the application pursuant to the rules and pursuant to the Court's inherent jurisdiction.

4. Insofar as concerns the principles applicable to the Court exercising its jurisdiction on the basis of its inherent powers, the principles have been considered in a number of cases, and the starting point is almost invariably the case of Barry -v- Buckley (1981) IR 306 in which Costello J. said (at p. 308):

5. The matter arose again in the case of Sun Fat Chan -v- Osseous Limited (1992) 1 IR 425 where, in the Supreme Court, it was stated by McCarthy J (at p. 428):

6. Again the issue arose in D.K. -v- A.K. (1993) ILRM 710 in which Costello J. again enunciated the principles which he had previously stated in Barry -v- Buckley, in the following terms:

7. The matter was again considered in the Supreme Court in O'Neill -v- Ryan (1993) ILRM 557, when that Court approved expressly the approach adopted by Costello J. in the case last cited.

8. All of these cases were considered and the principles again applied more recently by the High Court in Ennis -v- Butterly (1997) 1 ILRM 28.

9. Dealing first with the application made pursuant to Order 19 Rule 28, the plenary summons issued on the 25th May, 1998 and seeks, effectively, two reliefs namely a declaration that by virtue of a recited agreement the Plaintiffs are beneficially entitled to the property set out in the schedule and an order for specific performance of the agreement (dated 7th November, 1997) for the sale by the Defendants to the Plaintiff of the property which is set out in the schedule. The statement of claim was delivered on the 25th November, 1998 and after the appropriate recitals pleads in the following terms:

10. The Plaintiff pleaded that they were at all times ready, willing and able to complete the purchase of the premises, (or more particularly the outstanding premises) for a consideration which the Plaintiff claims was £370,000. The significance of the difference between £370,000 on the one hand and the £4,000,000 referred to at paragraph 6 of the Statement of Claim is that the Defendants had already sold to the Plaintiffs the several other properties mentioned in paragraph 5 for the sum of £3,630,000.

11. The premises in question are those premises known as 6 South Main Street, Naas in the County of Kildare, as well as part of the lands situated off South Main Street in the town and parish of Naas comprising 85 sq. metres or thereabouts. I mention these as a brief shorthand manner of describing the property.

12. There is, of course, no defence delivered to the claim because the Defendants have quite properly moved as soon as possible after the delivery of the statement of claim, to strike out the claim.

13. In considering whether or not to accede to an application based on Order 19 Rule 28 the Court should consider the pleadings only, ignoring for the purposes of this Rule of the Superior Courts, any affidavit evidence filed. To succeed under this Order, it must be established from the pleadings that the claim is vexatious or frivolous; see Cavern Systems (Dublin) Ltd. -v- Clontarf Residents Association (1984) ILRM 24. From a consideration of the pleadings it seems to me impossible to suggest that the Defendants could be certain that a Court would not accede to the order sought by the Plaintiffs. All the ingredients which would entitle the Plaintiffs to have an order on the statement of claim, absent any evidence or any defence, are such as to justify a Plaintiff moving for Judgment. I am of the view that a Court would be entitled to grant an order both as to the declaration sought and as to the specific performance, if one were to rely on the pleadings alone.

14. In these circumstances I find that the Defendants have not made out a case insofar as Order 19 Rule 28 is concerned.

15. Turning now to the question as to whether or not the Defendants are entitled to have their relief relying on the inherent jurisdiction of the Court, when one is considering a claim of this nature based on the inherent jurisdiction of the Court, it is permissible for affidavit evidence to be filed. A number of affidavits have been filed, and although there are several conflicting elements in the affidavits there are certain principles which Mr Buttenshaw has correctly acknowledged and conceded, including the fact that I must assume:

16. This particular approach which is adopted as being the correct approach in all of the cases in which affidavit evidence has been adduced, does mean that, insofar as there may be conflict between matters averred to by the Plaintiffs and the Defendants in their respective affidavits, such conflicts must be, at least for the purposes of this application, resolved in favour of the Plaintiff.

17. Having regard to the foregoing I now consider the claim and the affidavit evidence which has been adduced.

18. The facts and the events leading up to the commencement of the proceedings can be summarised fairly simply. The first Defendant runs a fast food restaurant and restaurant franchising business and over a period of years had entered into franchise agreements with various individuals to operate fast food restaurants under the name "Supermac's". Before 1997 Katesan Limited, an associated company of the first named Defendant, operated a number of these restaurants from premises which were owned by that company in Loughrea, Thurles, Roscrea, Tullamore and Kilkenny. That company is owned at least partly by the second named Defendant. In about early 1997 negotiations commenced between second named Plaintiff and the second named Defendant with a view to the second named Plaintiff purchasing these restaurant properties as going concerns. At that time the second named Plaintiff was also interested in buying the property the subject matter of these proceedings and the second named Defendant was keen to sell. That property had not previously been operated as a restaurant. It did however, have planning permission to do so. The negotiations were conducted also through the second named Plaintiff and his Solicitors with the second named Defendant and his Solicitors.

19. In late September, 1997 the second Defendant invited a Michael Chambers, (former bank manager and at present a professional mediator) to see whether he might act as a mediator between himself and the second Plaintiff and he agreed to do so. Mr Chambers agreed that he would act as mediator only if both the second Plaintiff and the second Defendant agreed to this arrangement. They did.

20. Mr Chambers then made arrangements for a meeting to be held on the 26th September, 1997 which was held. At the meeting of 26th September, 1997 it seems it was agreed between the second Plaintiff and the second Defendant that the Plaintiff would purchase all five properties which had been operated as "Supermac" outlets and which were owned by the second Defendant or by Katesan Limited, as well as the property at Naas which had planning permission for use as a restaurant. According to the affidavit sworn by Mr Chambers at that meeting the second Defendant informed the second Plaintiff that the property had a sitting tenant and that there was a Court case pending in relation to that. As a result of this difficulty Mr Chambers says that a sum of money was agreed between the parties to accommodate the possibility or eventuality of permitting this property to fall out of the arrangement. He says "in other words figures were agreed for either five properties or alternatively for six properties."

21. Some exchanges of correspondence took place between the Plaintiffs' Solicitors and the Defendants' Solicitors and heads of agreement were finally reduced to writing on the 7th November, 1997. These heads of agreement were reached after detailed negotiations in particular in relation to the appropriateness or otherwise of including within the normal property transfer contract matters involving insurance, take-over of staff, etc. It is said by Mr Chambers in his affidavit in relation to the heads of agreement, that the document was prepared by him on the 7th November, 1997 at the end of a day of negotiations between the parties and their Solicitors, at his house, and that these negotiations had continued for about 11 hours with few breaks. He averred to the fact that during the course of the negotiations it became apparent that the Solicitors for the Plaintiffs did not believe it wholly appropriate to include various matters such as insurance, equipment, fixtures, stock and other matters in the draft contracts for sale and that it would be more appropriate that these be dealt with in a separate agreement. He said that for the purposes of allowing for progress to be made on the issue of contracts for sale he, as mediator, agreed to record the areas in which agreement in broad terms had been reached. The heads of agreement which were executed on the 7th November were executed by Mr Chambers only, but not by the second named Plaintiff or the second named Defendant.

22. I now recite the headings of agreement in so far as they are pertinent to the application under consideration, but before doing so I mention that there was an amendment to the agreement, which was recorded on 13th November, 1997, which amendment document is not executed by any of the parties nor by Mr Chambers.

23. The 7th November agreement which is headed up "Paddy McSweeney and Pat McDonagh - Headings of Agreement" and under the heading "Agreement" it says "Paddy has agreed to sell his freehold premises at Roscrea, County Tipperary, Thurles County Tipperary, Loughrea, County Galway and Naas, Co Kildare together (with) his leasehold premises at Tullamore, County Offaly and Kilkenny, County Kilkenny to Pat McDonagh". Thereafter there is a consideration listed in the following terms:

24. The headings of agreement go on to deal with certain staff issues, the franchises, the insurance, litigation (if any), equipment, stock, services, alarms and so forth. It finishes in the following terms:

25. It will be noted that under the consideration when one totals the purchase price it comes to £4,000,000. Turning to the headings of the agreement which are dated 13th November, 1997, this records as follows:

26. The balance of the matters arising appear to be similar to the note on the 7th November and indeed the second page of the headings of agreement dated the 13th November, which was exhibited, is in fact dated 7th November. When one totals the consideration provided for it comes to the sum of £2,875,000 which when added to the figures for equipment, goodwill and consultant's fees equals £4,000,000 (four million pounds). It would therefore appear clear that what happened between 7th November and 13th November was twofold, namely that a specific sum was allocated to the individual properties out of the total sum involved, and an adjustment was made to the amount itemised for equipment, for goodwill relating to the business and for the consultant's fees, but that the overall figure of £4,000,000 for the sale of all the properties together with the business and the equipment going with the business remained the same.

27. There are substantial exchanges of affidavits, and significant bundles of exhibits, and it is clear that from the beginning when there were exchanges of correspondence between the Solicitors that each party included the standard clause which one sees in all Solicitors' correspondence dealing with properties, namely, that no contract is deemed to come into existence until both parties have executed the standard form Law Society Contract.

28. It is equally clear from the exchanges of correspondence that when it came to the actual sale of each of the properties individual contracts were drafted. A factual matter to be considered, at least at the end of the day if not for the purposes of this application is that each and every one of the properties intended to be sold, with the exception of the property in Naas, was in fact sold by the Defendants to the Plaintiffs. However, some time during the course of requisitions, the second named Defendant's Solicitors indicated that the exchanges in relation to the sale of the property in Naas were not proceeding further.

29. It is contended for by the Defendant that the claim of the Plaintiffs for specific performance cannot succeed. The basis upon which this claim is made under two main headings and the facts supporting those contentions are varied in nature. Essentially the Defendants say:

30. In support of the first contention that there was no concluded oral agreement between the parties, the Defendants say that prior to 7th November neither party had any intention of binding themselves to a contract. The Defendants also say that while the headings of agreement is a record by Mr Chambers of matters on which the parties had reached agreement in principle, it was intended that that agreement would be no more than that. The Defendants say that it is clear that this was the understanding and intention of the Plaintiff because the Plaintiff through their Solicitors by letter dated 18th November, 1997 stated:

31. The Defendants also say that that letter which notified the view of the second Plaintiff was headed "subject to contract/contract denied" and had in the final paragraph the standard form of denial that any contract exists.

32. The Defendants also say that if one looks at the headings of agreement viewed in isolation, that the headings do not constitute and are not capable of constituting a binding and enforceable contract, that it was never intended to record the terms of a binding or enforceable contract, that there is no attempt in the document to allocate purchase prices to each of the properties, and that there is no reference to the fact that the particular property in question in Naas was at the time occupied by a sitting tenant who had claimed certain statutory rights. Nor, the Defendants say, is there any mention in the document of when the agreement to sell was to be completed or what deposit was to be paid.

33. In relation to the amended agreement the Defendants suggest that as of 13th November the purchase price of the subject property had not been agreed and that the Plaintiffs' Solicitors wrote on the 6th November asking what the purchase price was. However, it seems clear that, of the overall purchase price, agreement had been reached as of the 13th November that the purchase price for this particular property would be £370,000.

34. It is the Defendants' contention that as of 7th November all matters such as the payment of a deposit, the completion of the sale, the question of vacant possession etc. were outstanding matters remaining to be negotiated.

35. On the second point namely that even if there had been a concluded oral agreement between the second Plaintiff and the second Defendant, there is no note or memorandum which is sufficient to satisfy the statute of frauds. The Defendants draw the Court's attention to the correspondence between the parties' respective Solicitors, to the fact that the heading of agreement does not record all the essential terms of a contract for sale of the premises and finally that in any event the agreement is not recorded by or on behalf of either Defendant.

36. It is said finally on behalf of the Defendants that the particular property the subject matter of these proceedings was always viewed in a different light from the several restaurant properties and did not form a necessary part of the overall deal. In support of this the Defendants say that an asset purchase agreement which excluded this property was drawn up and the sale of all the other properties proceeded to completion.

37. The Plaintiffs in response to the motion state that there was a concluded oral agreement between the parties, that this was sufficiently recorded in writing for the purposes of the Statute of Frauds, and insofar as the Statute of Frauds is concerned, they say that the document was signed by Mr Chambers as an agent on behalf of the second Defendant. The Plaintiffs submit that Mr Chambers was introduced by the second Defendant for the specific purpose of seeking to reach an agreement in relation to the properties, that the document itself was drawn up following a detailed meeting in the house of Mr Chambers, and that the matters listed in the document were the culmination of two or three previous meetings at which details of the properties to be sold were discussed. The Plaintiffs say that the document was drafted by Mr Chambers (with which Mr Chambers agrees), as a result of the meetings and the Plaintiffs say that it accurately reflects the overall agreement which was that a company on behalf of the Plaintiffs would purchase the premises at Loughrea, Thurles, Roscrea, Tullamore, Kilkenny and Main Street, Naas. It is said by the Plaintiffs that the document was subsequently circulated to the parties.

38. It has been the Plaintiffs' contention that the second named Defendant entered into the agreement on the basis that he was authorised on behalf of the company which had title to the premises to enter into the negotiations and reach an agreement. The Plaintiff says that although the Naas premises were not at the time operating as a restaurant, the premises had the benefit of planning permission for a restaurant and that this was why it formed part and parcel of the overall agreement. The Plaintiffs point out that the Defendants did not have a Supermac's branch in Naas and that this was a particularly suitable premises to develop as a fast food restaurant premises.

39. The Plaintiffs also say that the agreement which was drawn up was not just an agreement in principle but that as of the dates in question there was a fully formed agreement on the premises to be sold, the total purchase price for those premises together with fixtures, fittings and goodwill. The Plaintiff's say that the Defendants wished the transaction to be completed in a "tax efficient manner" and for that reason there was some alteration to the manner in which the purchase price for the individual components making up the entire agreement was allocated, within an overall total consideration which remained at £4,000,000. The Plaintiffs say that insofar as a sitting tenant existed in the Naas premises the agreement reached between them was that the second named Defendant would secure or seek to secure vacant possession of the premises and would be responsible for the cost of doing so. This contention on the part of the Plaintiffs appears to be borne out by the averments made by Mr Chambers in his affidavit where he says that insofar as this aspect of the matter is concerned it was agreed between Mr McDonagh and Mr Sweeney that a sum of money was fixed to accommodate the eventuality of allowing the property to fall out of the deal, having regard to the fact that vacant possession was not then available. Mr Chambers says "in other words figures were agreed for either five properties or alternatively for six properties". It is acknowledged by the second named Defendant that he has now secured vacant possession of the premises in question. The Defendants had contended that no provision was made for what would happen if vacant possession was not available.

40. In any event the Plaintiffs say that there was adequate part performance of the Agreement.

41. I do not have to decide at this stage whether or not a concluded oral agreement existed. What I have to conclude is whether or not at this time I am in a position to say that the arrangements which were reached between the parties could not possibly constitute an oral agreement concluded between the second named Defendant and the second named Plaintiff. As was stated in Lac Minerals -v- Chevron Corporation (1995) ILRM 161

42. I am not confident, that the facts and matters contended for by the Plaintiffs are likely to result in the Court finding at the end of the day that no concluded oral agreement was reached between the parties.

43. In the event that a concluded oral agreement is found to have existed between the parties, I still have to consider whether that concluded oral agreement, is unenforceable by virtue of the contention on the part of the Defendants, that it does not satisfy the provisions of the Statute of Frauds.

44. The first matter to be considered in this context is the claim made on the part of the Plaintiffs that Mr Chambers was acting as an agent for the second named Defendant in reaching the agreement which is recorded in the headings of agreement dated 7th November, as varied (insofar as purchase price is concerned) by the headings of agreement the first page of which is dated 13th November.

45. At this stage it is acknowledged that I have to assume that the Plaintiffs will be in a position to establish to the satisfaction of the Court that Mr Chambers was acting as an agent for the Defendants. That being so it seems to me at this stage that I cannot conclude that the written note, on that basis alone, could be rejected so as not to constitute a note or memorandum for the purposes of the Statute of Frauds.

46. The next contention is that, even if it were the position that Mr Chambers was the agent of the Defendant, an examination of the agreement itself (and even allowing for the variation) would show that its terms inherently fail to satisfy the Statute of Frauds, in particular because it does not contain within it a sufficient degree of detail so as comply with the Statute of Frauds. In that regard it is contended by the Defendant that the purchase price had not been agreed, the property had not been agreed, there was no agreement as to the deposit to be paid, there was no closing date, and there were no provisions made for the special conditions attaching to these premises, namely the fact that there was a sitting tenant. It is contended for by the Plaintiffs, and again I have to accept that they will be in a position to establish this, that what was being sold pursuant to the agreement was an overall package, namely, that in consideration of the payment of the sum of £4,000,000, a series of properties were being sold together with fixtures, fittings, goodwill and equipment, together with provision for a consultancy arrangement between the Plaintiffs and the second named Defendant.

47. The fact that five of the six properties were sold pursuant to standard form contracts in the Law Society format does not in my view satisfy me that there was insufficient identification of the properties or the price. All other things being equal, it seems to me to be eminently proper and appropriate that where there are several properties within an overall agreement, each of the properties might well be sold - also by reference to the Law Society standard form contract which provides for standard form information, for special conditions to be inserted, for general conditions to apply across the board, and for specific arrangements to be made in respect of any peculiarities attaching to each individual property. It is also sensible to approach the sale in this way because each of the properties may well have differing requirements as to the appropriate requisitions to be raised, and differing requirements as to the degree to which title may need to be examined. And finally of course where there is a sale of a number of properties pursuant to an overall agreement, it may be prudent to provide for individual contracts in standard form in anticipation of the possibility that at a future date some or other of the individual properties will be sold on without the others. For convenience in relation to any future potential sale it seems to me clear that it would be tidier, neater and altogether more manageable that the properties should be sold by reference to individual contracts, transfers, etc. So on the contention of the Defendants that support is to be found for the non-existence of a binding agreement in the fact that each of the other properties sold were sold pursuant to Law Society standard form contracts, at this time I do not think that this is conclusive evidence of the non-existence of the overall agreement contended for, or the alleged insufficiency of identification of the properties, or price.

48. I now turn to the matters which the Defendants contend would have to be included in a valid note or memorandum, namely details of the deposit to be paid in respect of each of the properties and details as to vacant possession. It is quite clear that the agreement does not indicate what deposit is to be paid. It is submitted on the part of the Defendants that not only was no deposit agreed but that there was no evidence to support any contention that the parties had agreed that no deposit would be paid, and that in the absence of provision for a deposit it was essential that there should be an indication that the parties had agreed there would in fact be no deposit. In the case of Boyle -v- Lee (1992) 1 IR 555 the principle in relation to a note or memorandum to satisfy the Statute of Frauds was considered, namely, that to be effective, one should be able to establish what are sometimes referred to as the four "Ps", that is to say the parties, the property, the price and any other essential provisions. Of course that was an appeal from a full hearing, unlike the present application. The parties are I believe, sufficiently identified , although it is true that the actual party holding the interest in the property the subject matter of these proceedings is an associated company of the company which held the title to all the other properties being transferred. However, since the negotiations were carried on by the second named Defendant, I think at the present stage it is sufficient to find that that Defendant negotiated on behalf of whatever party held the title to the several properties in question. As to the properties, they too are sufficiently described in the memorandum. As to the price I think the overall price is adequately described in the memorandum and as to the other essential provisions the law makes it clear that provided the first three elements are present, the fourth element is something to be agreed between the parties. The most that can be said in relation to Boyle -v- Lee as applied to this case is that the absence of a reference to what most parties would regard as an important element in an ordinary agreement namely, the deposit to be paid, raises the question whether the parties reached a concluded agreement in this case. However, that is not a matter upon which I can come to a final decision in this stage in the proceedings, since it will depend at the end of the day on the evidence to be presented and on what appears on discovery and also on the fact that the negotiations were in respect of seveval properties. On this aspect, as well as many others, it is clear that the facts are hotly contested.

49. On the other aspect, namely the absence of a closing date, again I think this falls into the same category as the deposit. What has been said on the part of the Plaintiff is that the second Defendant wished to have an early closing, but the mere absence of a specified date for closing does not mean that the note or memorandum is thereby vitiated.

50. On the final matter which Counsel on behalf of the Defendants contends would have been included, namely the position relating to the tenancy agreement and the fact that there were proceedings in being between the second Defendant and that a sitting tenant at the time of the negotiations, this too falls into the same category as the deposit or closing date. The evidence before the Court at present is that Mr Chambers indicated the parties had made provision for precisely that arrangement, although it is abundantly clear that the provision itself is not recited in the headings of agreement dated 7th November.

51. The Plaintiffs contend further however, that even if the memorandum does not satisfy the Statute of Frauds for the reasons put forward by the Defendants, nevertheless the Court would grant specific performance at the hearing because, the Plaintiffs say, there has been part performance of the agreement. This contention turns on the correct status to be ascribed to the arrangements entered into between the Plaintiffs and the Defendants. If it is found at the end of the day that the arrangement which was entered into constituted a single overall package then it is abundantly clear that much, indeed the vast part of that overall arrangement has been performed by both parties. And if it is the case that an overall package was agreed then I am satisfied that a Court could hold on the evidence presented to date, that there had been sufficient part performance on the part of the Plaintiffs. If however, at the end of the day, (and this is not a matter that lends itself to a conclusion at this time), the Court holds that such arrangements as were entered into, which are of a binding nature, were individual separate and discrete arrangements in respect of several different properties having their binding element in the several individual contracts executed in a format provided for by the Law Society then it seems to me that the claim to part performance is less tenable.

52. It is contended for by the Defendants that the correct interpretation of the arrangements is that these were, in fact, several separate and individual agreements reached in accordance with the standard form contracts of the Law Society, but they make an alternative claim namely that the several other contracts were inter-dependent upon each other and that each was also in turn dependent on the parties executing an asset sale agreement, in contra-distinction to the single arrangement which was being negotiated in respect of the property in Naas the subject matter of these proceedings. However, it seems to me that again this apparent division does not bring home the Defendants' case at this time. Because of the arrangements which existed between the parties prior to the negotiations it is the case that all of the goodwill, fixtures, fittings, staff, plant, equipment and the consultancy agreement followed on logically from the established franchise arrangement which existed in respect of the five properties. It is not the case that the fixtures fittings or staff could ever have been associated with the separate property in Naas because it had never been the subject matter of the franchise arrangements. No goodwill could possibly attach to any business carried on there (since there was no business carried on there), no staff existed in relation to that property, and so forth. So it seems to me that the existence of five formal contracts in respect of the other properties, their inter dependence one upon the other, and their overall inter dependence on the asset sale agreement does not mean that an overall agreement in respect of six properties had never been entered into.

53. In the circumstances I hold that it would not be appropriate to strike out the proceedings at this point in time. I bear in mind in particular the fact that the Supreme Court has stated that while the facility to strike out a case in limine on the grounds that it cannot possibly succeed is one from which the Court should not shirk, it is equally the case that the Supreme Court has stated it is a remedy which ought to be applied sparingly, and in general ought to be applied only to circumstances where there are undisputed facts. The very last thing that can be said about these proceedings is that there is any area in which there are undisputed facts.

54. I find against the Applicants both under the Rules of the Superior Courts and under the Court's inherent jurisdictions.