High Court of Ireland Decisions

1. This is an action for damages for breach of an alleged contract entered into between the Defendant and the Plaintiff whereby the Defendant allegedly agreed to sell to the Plaintiff a site of approximately 14 acres at Clondalkin Industrial Estate for the sum of £780,000. It has been agreed between the parties that the liability issue be determined first and this is the issue which I will be addressing in the judgment.

2. Although there are 12 paragraphs in the defence, there are essentially two alternative grounds on which the action is being defended. These are:-

3. The first of these two defences can be sub-divided into three distinct contentions put forward

4. In other words the Defendant maintains that each of these factors would have prevented the

5. It is important now to examine the facts. Telecom Eireann, as agent for its own subsidiary the Defendant company, put up for sale a site of approximately 14 acres of land in Clondalkin which was surplus to the company's requirements. Jones Lang Wootton were the retained agents for the sale. Mr. Nigel Healy of that firm found an interested purchaser in the form of the Plaintiff, Shirley Engineering Ltd. The managing director of that company was Mr. George Shirley and Mr. Healy's negotiations were with him. It is not necessary to go into all the details of the bargaining about price. It is sufficient to state that an agreed price was arrived at, namely £780,000. This was in the course of oral discussions between Mr. Healy and Mr. Shirley. They both walked the lands and it was pointed out to Mr. Shirley that until proper mapping was done there would be some uncertainty as to the precise boundaries. As the acreage would be approximately the same this was of no concern to Mr. Shirley and I accept his evidence that within the parameters of the agreement he was prepared to accept the final determination by Telecom of the boundaries in accordance with the maps to be produced. Mr. Healy in his evidence explained how he had made it clear to Mr. Shirley that any agreement they reached would be subject to board approval and that he had also indicated that it would be intended there would be a formal contract in writing in which matters such as the deposit and closing date would be inserted following on discussions between the Solicitors. He was not certain whether he had used the precise expression "subject to contract" in the oral discussion. My impression was that there was no significant difference on these matters between the evidence of Mr. Healy and the evidence of Mr. Shirley. Mr. Brady, Counsel for the Defendant, however, in the course of cross-examination got Mr. Shirley to admit more that once that the negotiations had been "subject to contract". In Mr. Brady's view this was conclusive. As I argued with him at the hearing, I do not necessarily accept that that is so. While it is abundantly clear from the authorities that the expression "subject to contract" when included in a document must in virtually all circumstances be construed as meaning that there was no binding agreement until a written contract was signed, it is quite another matter to extend that principle to the use of the words "subject to contract" in oral conversation. In considering whether the agreement arrived at is conditional on a written contract being entered into, the Court must assess all the evidence and look at all the surrounding circumstances and the entire context in which an expression such as "subject to contract" was used. It is immaterial whether I am correct in that view or not because having done the exercise which I suggested a Court must do, I have come to the firm conclusion that the oral "agreement" arrived at between Mr. Shirley and Mr. Healy was in fact subject to contract in the sense that lawyers use that expression. The evidence establishes that Mr. Shirley and his company were well accustomed to dealing in property and I think it inconceivable that Mr. Shirley could possibly have thought that there was a concluded agreement in advance of a written contract of the normal type signed by the parties. While one cannot be sure of the precise words used, I am satisfied that Mr. Healy conveyed to Mr. Shirley that there would be no concluded agreement until there was a formal written contract. Mr. Shirley being well accustomed to property transactions would not have been misled and would have understood that that was the intended position. There are other aspects of the evidence which corroborate that point of view. The letter written to Mr. Shirley by Mr. Healy on the day after the agreement was entered into dated 18th February, 1997 in which Mr. Healy sets out the terms that had been agreed on and makes it clear that they were "subject to contract". It is not just a question of Mr. Healy heading the letter "subject to contract/contract denied" which of course he did and thereby prevented it being a note or memorandum for the purpose of the Statute of Frauds. He also in the body of the letter when referring to the purchase price states that it was "subject to contract". There is then the final paragraph which admittedly is probably a paragraph which is always inserted in equivalent letters from Jones Lang Wootton in which it is made clear that the letter is for information purposes only and that no contract shall exist or be deemed to exist until formal contracts have been executed but what I think is particularly important is Mr. Healy's oral evidence combined with the fact that in the actual body of the terms of the agreement he uses the expression "subject to contract".

6. Secondly, and just as importantly, instructions were given by Mr. Shirley to the Plaintiff's own Solicitors, William Fry, on 24th February, 1997 to "hold for a couple of days". That instruction was countermanded on 5th March, 1997. But the fact that Mr. Shirley gave this instruction indicates to me that he himself did not consider himself contractually bound at that stage. I can see of course the argument put up by his Counsel, Mr. Nesbitt, that all he was concerned with was the non-creation of a letter which might constitute a note or memorandum for the purposes of the Statute of Frauds. But I think that this is too subtle and far-fetched an explanation. It is much more likely that Mr. Shirley quite rightly believed that so long as no further steps at least were taken, he was not contractually bound. That belief would have been based on the nature of his negotiations with Mr. Healy.

7. Accordingly, I am of the view that no unconditional concluded agreement was reached between Mr. Shirley and Mr. Healy as everything was understood to be subject to contract. But there is a second reason also why I think there was no concluded agreement. It would have been unthinkable that the Defendant would enter into an agreement of this kind without insisting on a deposit. Mr. Shirley fully accepts that he would have had to pay a deposit and he had no fixed views as to what the nature of the deposit would have been. My impression was that he was willing to pay any deposit within reason. It was not the policy of Jones Lang Wootton to agree the amount of a deposit and I am satisfied that it was clearly understood between Mr. Shirley and Mr. Healy that the question of deposit was to be negotiated between the Solicitors. Now it may well be that in many types of sales or perhaps sales in particular areas, there would be a recognised percentage deposit which would invariably be inserted in the written contracts. In such a case there might be circumstances depending on the nature of the discussions where the Court would imply an agreement to pay the standard deposit. For reasons which I will explain, I do not think that the implication of such a term by the Court would be contrary to the views expressed by Finlay C.J. in Boyle -v- Lee , [1992] 1 I.R. 555, quite apart from what the views of the majority of the Supreme Court in that case may have been. But this particular case is rather similar to Boyle -v- Lee in that there is no evidence to establish that there was a recognised standard percentage deposit. On the contrary, Mr. Shirley indicated that he would not have known what the particular rate would be and that he was not concerned with it and furthermore it was understood that it would be negotiated between the Solicitors. It is true that witnesses called on behalf of the Defendant indicated that as far as Telecom was concerned a deposit of 10% would have been acceptable. But as far as the oral discussions go all that emerged in relation to the deposit was a certain willingness on the part of the Plaintiff to pay any kind of deposit (though one must assume this was within reason). In those circumstances I do not see how a Court could imply a term that the deposit was to be 10%. The deposit is a most important term in an agreement of this kind as it is a major weapon in the armoury of a vendor. Once there was no express or implied agreement as to the amount of the deposit there cannot be said to have been a concluded agreement. For that reason also therefore I hold that there was no concluded agreement in this case.

8. I am less impressed by the other two arguments against a concluded agreement. I do not think that the failure to agree precise boundaries was necessarily fatal to the conclusion of an agreement. It is clear from the evidence that the basic identity of the lands was known and the approximate acreage and that the Plaintiff was willing to accept whatever Telecom ultimately set down as the boundaries in the formal map. I think that that was sufficient certainty as to the property being bought. Nor do I think that the failure to agree a closing date would have necessarily prevented a concluded agreement. It is true that the Plaintiff wanted the sale closed as soon as possible but I do not think that Mr. Shirley had in mind some unusual early date. I think that it would be reasonable for the Court to imply, as Courts have implied in many cases in the past, that the sale was to be completed within a reasonable time.

9. Before concluding this part of my judgment, however, in relation to whether there was a concluded agreement or not, I intend as I indicated to comment further on Boyle -v- Lee cited above as it featured so prominently in the argument. What is particularly important to consider is what exactly did Finlay C.J. hold in relation to agreement on a deposit. The key passage is at p. 571 where the former Chief Justice after referring to the finding of the trial Judge that the failure of the parties to reach any agreement on the question of a deposit was irrelevant since it was of no importance in the contract, said the following:-

10. There are a number of important points to be drawn from this passage. The first is that the former Chief Justice was strongly disputing that the question of a deposit was so unimportant or minor that the absence of agreement on it did not prevent there being a concluded agreement. That of course was on the basis of the facts in that particular case. However, as I have already indicated, the facts in this case are remarkably similar. The same comment could therefore equally be made in this case. Secondly, the former Chief Justice was pointing out that this would be so in a contract of this kind even if a purchaser had expressed willingness to make a deposit of the appropriate amount or the usual amount then experienced in transactions in Dublin. The important words there are "is willing to make". A unilateral willingness cannot give rise to an implied agreement. There could only be an implied term that the usual deposit was to be paid if the words or conduct of both parties indicated that that is what was intended. The mere willingness on the part of one party to pay such a deposit could not give rise to an implied term. For that reason I do not think that Boyle -v- Lee is in any way an authority for the proposition that there can never be an implied term that the usual deposit will be paid. But neither in that case nor in this case is there the necessary surrounding evidence to give rise to such implication. Hederman J. agreed with the judgment of Finlay C.J. While there may be some ambiguity in the judgment of O'Flaherty J., I think that it is reasonably clear from his judgment that he considered that the deposit was of importance and that there had been no express or implied agreement in relation to its amount.

11. Although it is not strictly necessary for me to do so, I will deal very briefly with the argument made that the agreement was subject to board approval and that board approval had not been granted. If this was the only point which the Defendant could make by way of denial of a concluded agreement, I would be wholly in favour of the Plaintiff. It emerged in the evidence that there are procedures within Telecom Eireann for property transactions. Despite an argument made at the end of the case by Counsel for the Defendant, Mr. Brady, I am quite satisfied from the evidence given on behalf of the Defendant that it was at all material times intended that the procedures for property transactions as set out in the particular document in Telecom Eireann were to be applied in relation to this sale. Mr. Brady makes the technical point that the vendor was not Telecom Eireann but Irish Telecommunications Investments Plc. and that Telecom Eireann was merely an agent. Factually of course that is true but it is quite clear to me from the evidence that the Telecom property procedures were intended to be used. Under those procedures the expression "board approval" effectively does not necessarily mean what it says. Depending on the amount of the price, the so-called board approval can be given by an executive at a particular level. In this case, having regard to the price of £90,000, the relevant executive was the Chief Executive of Telecom Eireann. Although Mr. Healy was instructed by Mr. Michael Arthur, the executive in charge of the sale, to make it clear that the sale would be subject to "board approval from Telecom Eireann", it is perfectly clear that such approval had already been given when that instruction was made. I appreciate that the witnesses called on behalf of Telecom seemed to indicate in different ways that everything still remained subject to the approval of the Chief Executive and that that had not yet been obtained. I am unable to accept that evidence, except of course insofar as he would have had to sign the ultimate written contract and given that the transaction was "subject to contract" he could have refused to do so and then the Defendant would not have been bound. But I find it inconceivable that a busy Chief Executive of Telecom would be twice asked to approve this sale. I think that Mr. Arthur in giving the instruction to Mr. Healy either did not apply his mind to the fact that the approval had already been given or more likely was being extra cautious in case that prior approval might not constitute board approval within the meaning of the property procedures. But even if I am wrong in that analysis, it would seem to me that once Mr. P.J. McGrath of Telecom Eireann's Solicitors Office and on instructions from the executives of Telecom, wrote a letter on 3rd March, 1997 acknowledging the sale, the Plaintiff would have been entitled to assume and the Defendant would not be entitled to dispute that "board approval" had been given. That letter was in the following terms:-

12. Certainly once that letter was written, and of course in my view at a much earlier stage, the Defendant could not defend this action simply on the basis that board approval had not been obtained.

13. Strictly speaking, it is unnecessary for me to deal with the Statute of Frauds issue. Given that I have held that there was no concluded agreement, that issue does not really arise. But in case a higher court disagreed with my views, I think it would be useful if I did in fact deal with the Statute of Frauds point. For this purpose I must artificially assume that there was a concluded agreement and the question then arises is there a note or memorandum to satisfy the statute. On one view the letter from Mr. McGrath of 3rd March, 1997 which I have already set out is almost a textbook note or memorandum. I think that I am right in saying that specific performance decrees have been granted many times in the past on foot of alleged memoranda much less clear than that one, though in the light of Boyle -v- Lee that might no longer be the case. I am unsure of this however because it is not entirely clear to me that in his comments on the adequacy of the note or memorandum in Boyle -v- Lee , Finlay C.J. addressed the question of whether every term or only the essential terms in an orally concluded agreement had to be included in the note or memorandum. What the former Chief Justice seems to have been addressing were two different points. One is whether the note or memorandum must either expressly or by implication acknowledge the existence of a concluded agreement and he, like the other members of the Court held that it must, thereby agreeing with the views already expressed by Keane J. in Mulhall -v- Haren, [1981] I.R. 364. His reference to "the price, deposit, closing date, résumé of title etc." is in that particular context and not in any other context. He is suggesting that if those matters were clearly set out in a document that would be an implied acknowledgement of an agreement. Secondly, he was again agreeing with the views of Keane J. in Mulhall -v- Haren that any words in the memorandum which indicated a denial of a contract prevented the memorandum itself from being sufficient for the purposes of the statute. I have already held that there was no implied term in the relevant negotiations in this case that a so-called usual deposit would be paid and I have also held that the deposit was an important term. But that was entirely in the context of whether there was a concluded agreement or not. Once the deposit had still to be agreed there was no concluded agreement. It does not follow from that that the amount of a deposit expressly or by implication agreed would upon have to be set out in the note or memorandum to satisfy the Statute of Frauds. The authorities seem to establish that only the essential terms need be included in the note or memorandum and by that I mean the kind of terms that would always be regarded as essential, together with any special added terms which the parties in the particular case regarded as essential. I do not think that the amount of the deposit is an essential term in that sense, that is to say in the sense that it would have to be included in the note or memorandum. Mr. John Farrell, S.C., in his book "Irish Law of Specific Performance" says the following:-

14. He goes on to cite a passage from Lord McDermott, L.C.J., in Stinson -v- Owens , unreported judgment but noted in 107 I.L.T.S.J. 239:-

15. Similar views were expressed by the Supreme Court in the form of the leading judgment by Maguire C.J. in Godley -v- Power, (1961) 95 I.L.T.R. 135 at 145, the relevant passage is as follows:-

16. If, therefore, there had been a concluded agreement in this case which had embraced the amount of the deposit, I think that the letter from Mr. McGrath dated 3rd March, 1997 would have been a good note or memorandum of it to satisfy the Statute of Frauds and I reject the argument that it was part of on-going correspondence in which it had been made clear that everything was subject to contract. This was the first letter coming from the Solicitor's office. As it does not arise, I express no views as to whether perhaps the Plaintiff might have been estopped from relying on the letter of 3rd March as a note or memorandum in view of the fact that his own Solicitors, William Fry, vehemently denied the existence of any contract in the subsequent correspondence from them.

17. The reason that this sale fell through was because a much higher offer came in from another potential purchaser. In the event, the alternative transaction was never completed either. The Plaintiff was understandably aggrieved as it appeared to be a straight case of gazumping on the part of the Defendant. However, I do not intend to go into the circumstances of that aspect of the case in this judgment, though they may possibly have some relevance if and when I come to consider any question of costs. With great sympathy for the Plaintiff and great regret, I must dismiss the action.