High Court of Ireland Decisions

 
THE HIGH COURT

Record No. 2001/12040P

BETWEEN

JOHN BOYLE

PLAINTIFF

AND
WHITVALE LIMITED and PATRICK A. HURLEY

DEFENDANTS

JUDGMENT of Ms. Justice Finlay Geoghegan delivered the 24th day of July 2003.

The plaintiff and a Mr. Tom McCarthy, initially with others, agreed to develop together a property at Springfort in Cork. They became shareholders in Whitvale Limited which acquired the property and through which the development was substantially carried out. These proceedings were commenced following the sale of one portion of the lands identified in the proceedings by reference to a map as including a plot C 1. A dispute had arisen between the plaintiff, whom I shall hereafter refer to as Mr. Boyle, and Mr. McCarthy, as to the distribution of the proceeds of the sale of the lands in plot C 1 which was held in the name of Whitvale Ltd. ("Whitvale"), in trust for Mr. Boyle and Mr. McCarthy. The second named defendant was the solicitor acting in the sale.

At the time the action came on for hearing before me there was only one live issue between Mr. Boyle and Mr. McCarthy (who effectively defended the proceedings on behalf of Whitvale) relating to the deduction of certain expenses

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allegedly due to McCarthy Properties. The second named defendant was no longer a party to the proceedings.

Following initial submissions from counsel for Mr. Boyle and Mr. McCarthy I directed that on the pleadings the only issues which I could hear and try were:

1. Whether Mr. Boyle agreed on the 18th February, 2000 that Whitvale Ltd. should be entitled to discharge out of the proceeds of sale of the sites including C1 a sum of £42,000 to McCarthy Properties in relation to administration costs in respect of work done and to be done by that firm.

2. If Mr. Boyle did enter such an agreement, was such agreement contingent upon the completion and sale of the six house residential development or was it to be paid regardless of whether or not the said six houses were constructed and the development completed in accordance with the planning permissions already obtained.

I directed, that as the onus of establishing such an agreement was on Mr. McCarthy and Whitvale, that it should be the plaintiff on the issue and Mr. Boyle the defendant on the issue.

Mr. McCarthy, Dr. Frank Matthews, who was also involved in the development at Springfort, and Mr. Boyle, gave evidence before me. Detailed evidence was given of the history of the entire site and a number of related disputes between the parties. The earlier history of the development of the site is not relevant to the issues which I have to determine save in relation to an alleged established relationship between Whitvale and McCarthy Properties.

It was common case that Whitevale did not have any offices or staff. It was also common case that McCarthy Properties had managed the venture and that it had offices in Washington Street, Cork and employed staff. It was also common case that

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McCarthy Properties had been paid over the years by Whitvale for management and administrative work. Mr. Boyle accepted in cross examination that he had authorized from time to time payments by Whitvale to McCarthy Properties (or Mr. McCarthy) for work done for Whitvale. An authorisation to this effect, signed by Mr. Boyle in 1997 was handed into court.

By late 1999 the position in relation to the development at Springfort appears to have been as follows:

1. There was a site A undeveloped which was a contribution to an open space in certain planning permissions.

2. The site A1 was owned jointly by Mr. Boyle and Mr. McCarthy.

3. The site B1 was owned by Dr. Matthews.

4. The site C1 was in the name of Whitvale and held in trust for Mr. Boyle and Mr. McCarthy in equal shares.

5. A decision of An Bord Pleanala had granted planning permission for six houses on the area made up of sites A1, B1, and C1.

It is undisputed that on the 18th February, 2000 a meeting was held between Mr. Boyle, Mr. McCarthy and Dr. Matthews at 11/13 Washington Street, Cork, in relation to the proposed development of the six houses pursuant to the planning permission obtained on sites A1, B1 and C1. It is also undisputed that Mr. McCarthy had prepared in advance of that meeting a document headed "VAT Inclusive" setting out projected costings and a projected profit for the development of the six houses. The intention appears to have been that the six houses would be constructed as a single project and that the individual houses, when built, would either be retained by the relevant owner or sold off.

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The document prepared by Mr. McCarthy includes all the estimated costs associated with the construction of the houses and the completion of the development to bring them to a point where they could be sold to third party purchasers. It also included an estimated selling price and, by deduction, an estimated profit. Both the global and per unit estimates were included. There were also a number of notes to the figures set out.

There were two administrative fees included. Administrative fee no.1 at £24,000, i.e. £4,000 per unit and administrative fee 2 at £18,000, i.e. £3,000 per unit. Under the heading of notes in relation to these was stated:

"Administrative fee 1 See note 1 attached

Administrative fee 2 Procuring all tenders, viewing past work of chosen builder, agreeing contract terms,administer stage payments, collection of cost and reporting to client etc."

On a copy of this document there were two additional hand written notes signed by each of the three persons present. These are relevant to the issues which I have to determine and read:

"We hereby authorise McCarthy Properties to complete the negotiations with all parties to give effect to a contract to construct in accordance with the quotation and accounts herein".

"It is agreed that Pat Hurley Solr. will have carriage of sale of land to partners from Whitvale and that Frank Buttimer & Co. will have carriage of sale of housing units."

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Underneath these notes are the signatures of Mr. McCarthy, Dr. Matthews and Mr. Boyle.

There are in addition minutes of this meeting which were handed into court and to which I will return.

The evidence as given by Mr. McCarthy was that after this meeting McCarthy Properties carried out some of the work specified in the note relating to administrative fee 2. In particular he instructed a quantity surveyor to draft bills of quantity; he circulated these two builders; got quotations from four builders and went through them, they had settled on Michael Hanrahan, builder and, whilst there was a question mark about his ability to bond, he went to Lismore to look at a project he had built with his son and another person. He also stated that he had made an application for funding to Bank of Ireland on behalf of the three individuals who were to fund the project.

The construction project did not proceed. There is a dispute as to why this did not happen. It is not necessary for me to resolve this dispute. What is undisputed is that subsequently Cork Corporation decided not to take in charge the site A for open spaces. The three individuals put the site comprising A1, B1 and C1 on the market and ultimately the Cope Foundation offered £550,000 for the lands comprising sites A and A1, B1 and C1. Following some discussions and disagreement the three individuals agreed to sell at this price. Dr. Matthews described the availability of the site A as a "windfall".

There were a number of disputes relating to the proposed sale to the Cope Foundation and in particular as to the identity of the solicitors who were to have carriage of sale. Whilst not directly relevant to the issues which I have to determine they undoubtedly form the backdrop against which the dispute which has now arisen

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essentially between Mr. Boyle and Mr. McCarthy in relation to the administrative charges arose. It is clear that by the 6th February, 2001 when the claim for the administrative charges was made that relations between these parties were bad. The contemporaneous correspondence confirms this position. In a letter of 6th February, 2001 from Patrick A. Hurley, solicitors, then acting for Whitvale on the instructions of Mr. McCarthy to Mr. Frank Buttimer who was acting for Mr. Boyle, it was stated:

"The fees which the McCarthys state are due and owing in respect of the preparation work and pre-sale work are as follows:-

1. Administration fee in relation to the application

and receipt of planning permission: £24,000.00

2. Administrative fee in relation to the

procuring of tenders, viewing past

work of chosen builders, agreeing

contract terms and other sundry items: £9,000.00"

This claim was made in the context of correspondence relating to the appropriate deductions from the proceeds of sale on completion.

This letter drew an immediate response of the 7th February, 2001 from Frank Buttimer & Co., in which it was stated that there was no basis for administration fees in the sum of £24,000.00 or in the sum of £9,000.00. That was a statement which was made "subject to instructions". A further response was written on the same day by Patrick A. Hurley & Co. and again a response from Frank Buttimer on the 15th February, 2001 which are repetitive and on the 15th February Patrick A. Hurley & Co. wrote a short letter asking :-

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"Prior to taking full instructions from our clients we would ask you to confirm whether your client is agreeable or otherwise to the question of administration fees."

That letter got the following response on the 22nd February, 2001 from the solicitors on behalf of Mr. Boyle:

"Our client's position is that he does not accept that there are any fees due for administration in relation to the account that you have presented. Please at this point in time advise us how an administration fee is justified, who or what company proposes to charge the administration fee, furnish documentation or vouchers in relation to the matter."

To that letter Patrick A. Hurley & Co. responded on behalf of Whitvale and/or Mr. McCarthy in a letter of the 27th February, 2001 as follows:

"In relation to the question of Administration fees, the question that would appear to arise now is who, in fact, carried out the administration in relation to the matters at hand. It is obvious to the Writer that all administration was carried out by the McCarthys on behalf of Whitvale over the whole of the period involved. Again, full and detailed particulars of the Administration fees have been furnished to Mr. Boyle and he is well aware of these.

We refer to a meeting had in this office on the 21st day of February, 2001, wherein we met with Dr. Frank Matthews, Mr. Jim Buckley, Mr. Tom McCarthy Junior and Mr. Thomas McCarthy, wherein it was

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confirmed to the Writer that each and every detail of the administration work was already made available to Mr. Boyle. It has been stated to the Writer, by the other parties involved, that Mr. Boyle had been aware at all times and had authorised the carrying out of all such works, including the administrative work."

To this the response from Frank Buttimer & Co. on behalf of Mr. Boyle on the 26^th March, 2001, was:-

"In relation to the matter of administration fees, we confirm that our client acknowledges that certain administration works were carried out by Messrs. McCarthys in relation to the dealings with the overall site over the period of time. We specifically are instructed however that no fee was ever agreed and no method of calculation of fee was ever devised and accordingly, our client had been unaware until the recent correspondence as to the amount being claimed. Your client appears to be claiming £33,000.00 for administration fees. There can be no basis in reality for this particular charge. Please advise how it is broken down or on what basis this could possibly be estimated."

On the 3rd April, 2001, Patrick A. Hurley & Co. wrote in response to this as follows:

"In relation to the question of administration fees, we are again pleasantly surprised that your client now acknowledges that administration works were in fact carried out by Messrs. McCarthys in relation to the site over a period of time. We reject entirely and we feel

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that it is quite disingenuous of your client to claim that there is no fee, that no fee was ever agreed and that no method of calculation of the fee was devised and we again, at the risk of repetition, must state that it is entirely disingenuous of your client to claim that he was snot aware of such a fee until the recent correspondence. There is ever basis in reality for the charge of £33,000.00 and your client is well and truly aware of the fees and the manner in which they were calculated."

On the 18th April, 2001 Frank Buttimer & co. wrote in response:-

"In relation to administration fees, we repeat our position that no fee was ever agreed as between your clients and our client in relation to the matter of administration and indeed until such time as it was raised in your letter, it had not previously been discussed at all between our respective clients. Our client cannot therefore see how there could be a fee of £33,000.00 on top of the very sizeable fees which are being claimed for the other professionals. Please advise how the fee is calculated. Again we repeat that there appears to us to be no basis in reality for a fee of this magnitude."

Finally and for the first time, by letter of the 9th May, 2001, Patrick A. Hurley made reference to the meeting of the 18th February, 2000 and the document heading "VAT Inclusive" stated as follows:-

"We enclose a copy of Minutes of a Meeting at which Mr. Boyle and Dr. Frank Matthews attended and where the full layout of Fees, Costs and Expenses were laid before them. Indeed we are instructed that the

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Meeting dealt at length with those fees and finally the McCarthys were authorised to complete the negotiations in accordance with the quotations and accounts therein. Those accounts include the administration fees of £24,000 and further administration fees of £18,000 as you can see from the breakdown. These details were given to and accepted by Mr. Boyle at the time of that meeting and as is obvious from the document he clearly signed off on foot of these figures and sanctioned the accounts. It is clear that your client is mistaken in his belief that these matters were not raised and our clients are appalled at the suggested that no mention was ever made of the fees prior to our letter. We have further spoken to the other parties involved including Mr. James Buckley and Dr. Frank Matthews and they have all agreed that at all times Mr. Boyle was well aware of the accounts and fees as mentioned in our previous correspondence. In any event it is clear from the signed Minutes and as you can see Mr. Boyle has signed the Minutes on two different sections thereof, that he was well aware of the figures as mentioned and his instructions to you in that regard are inaccurate to say the very least."

The response from Frank Buttimer & Co. in a letter of the 18th May, 2001 was in the following terms:

"As regards the distribution of the proceeds of sale, you have supplied us with Minutes of a Meeting dated the 18^th February, 2000. Our client is well aware of these Minutes. It is clear however that the Meeting in question envisaged the development construction and eventual sale of

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six houses by the group in relation to the three individual sites. The administration costs described as administrative fee one and administrative fee two related to same. It is therefore abundantly clear that since the project did not proceed on that basis, our client cannot have any liability for any administration fees arising out of what was projected to be done. Any suggestion that the other Partners to this venture might make to the contrary is flatly rejected. Our client acknowledges that certain works were done by the McCarthy Group in relation to the earlier aspects of the dealings with the land in respect of which no administration fees and no other professional fees quite frankly were agreed. If McCarthy Developments took a more appropriate approach and indicated what a reasonable fee in all the circumstances to be divided appropriately between the three Partners to this venture might be for any work which McCarthy Developments have done to advance the project up to the point in time where it was agreed to sell the entire property, then our client will give consideration to same. We invite you to suggest something appropriate and reasonable in all the circumstances for our attention. Again however, we are not prepared to wait and jeopardise the sale of the property whilst this issue which has been the subject of considerable correspondence since we first went to your office in December of 2000 is being resolved."

It is noteworthy that in the above correspondence which commenced with the claim made on 6th February, 2001 that it was not until 9th May, 2001 that reference was made to the alleged agreement on 18th February, 2000.

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The other contemporary document which is relevant to the dispute as to the nature of the agreement reached on 18th February, 2000 is the minutes of that meeting. The evidence given by Mr. McCarthy was that these were minutes prepared shortly after that meeting. Under a heading of "list of expenses" they state:

"TMcC Snr produced a list of expenses which had been incurred and additional expenses which would be payable in the future together with planning fees, costs, etc., all contained in a booklet of expenses and costs. A copy of which was given to each of the investors, showing the final costs of building together with costs and expenses fees etc.

In addition there were projections produced showing the quotation received together with the list of expenses in total and the projected sale price as indicate ultimately showing the net profit achievable from each unit. These included costs for McCarthy Developments for retrospective work and for future work.

In general FM, who particularly references that the amount of work done was significant and that the fee charged did not seem to be sufficient to cover that work, accepted these. JB was less forthcoming with regard to that, but having first indicated and requested what that was about was satisfied after the contribution of Frank Matthews with regard to fees."

It is also of importance that under a heading of progress there were then set out a number of steps which were to be taken for the purpose of completing certain transactions in relation to the lands between the three individuals and Whitvale and the entering into contracts with builders for the building of the envisaged houses. The document also records an agreement in relation to funding the proposed development.

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Meeting of 18 February 2000

The oral evidence given by the three individuals in relation to this meeting puts, with the benefit of hindsight a different subjective view of the nature and context in which the agreement reached. The only significant objective matter about which there was dispute was whether or not there was produced at that meeting a more detailed list of the expenses than in the document headed "VAT Inclusive". Mr. McCarthy and Dr. Mathews gave evidence that such a detailed list was produced. Mr. Boyle denied this. I have concluded, as a matter of probability, that such a detailed list was produced.

Conclusions.

I have concluded that the agreement reached on the 18th February between the three individuals was primarily an agreement to complete the development of the project by the building of six houses in accordance with the cost estimates set out in the document headed "VAT Inclusive". Part of such agreement was an agreement which authorised McCarthy Properties, as is stated in the hand written note "to complete the negotiations with all parties to give effect to a contract to construct in accordance with the quotation and accounts herein." I have also concluded that as part of the agreement reached it was agreed by Mr. Boyle that upon the completion of the development there should be paid to McCarthy Properties the Administrative fee 1 of £24,000 and the Administrative fee 2 of £18,000.

The courts in construing a written agreement between parties will construe it in what is sometimes described as the factual matrix in which it was concluded. The principles were succinctly expressed by Keane J. (as he then was) in Kramer v. Arnold [1997] 3 I.R. 43 at p. 55 where he said

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In this case, as in any case, where the parties are in disagreement as to what a particular provision of a contract means, the task of a court is to decide what the intention of the parties was having regard to the language used in the contract itself and the surrounding circumstances. "

The factual matrix or surrounding circumstances in which the agreement recorded on the signed document headed " VAT Inclusive" was concluded includes the undisputed fact that Whitvale had authorised McCarthy Properties to carry out the work which it had already done in relation to seeking planning permissions and other preliminary works connected with the development. Further it was undisputed that they were so retained upon the basis that they would be paid a fee for the work done. I have concluded that as a matter of probability the agreement reached at the meeting of the 18th February, 2000 included an agreement that the proposed Administrative fee 1 of £24,000 was a reasonable fee to be paid to McCarthy Properties for the work already done on behalf of Whitvale and its individual investors in connection with the development of this portion of the lands at Springfort. I further concluded that such agreement was as a matter of probability not dependent upon the completion of the proposed development in accordance with the then plans. The work was already done and not related to works yet to be carried out.

The position in relation to Administrative fee 2 of £18,000 appears to me to be different. I have concluded that as a matter of probability the agreement to pay to McCarthy Properties a sum of £18,000 for work yet to be done was conditional upon the precise development project then envisaged being realised. Those works related exclusively to the particular project of building houses and financing the cost of the

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building of the houses. Accordingly I have concluded on the issues which I was trying:

1. Mr. Boyle did agree on 18th February, 2000 that Whitvale Limited should discharge out of the proceeds of sale of the site C1 its proportionate share (relative to the other sites involved) of the sum of £42,000 to McCarthy Properties in relation to administration costs in respect of work done and to be done by that firm.

3. That agreement insofar as it related to the Administrative fee 1 of £24,000 was not contingent upon the completion and sale of the six house residential development. It fell to be paid upon the sale of the lands involved including site C1.

3. The agreement insofar as it related to Administrative fee 2 of £18,000 was contingent upon the completion and sale of the six house residential development.