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Cite as: [2003] IEHC 615

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THE HIGH COURT

9260P/2001

BETWEEN

THE ATTORNEY GENERAL AT THE RELATION OF BERNARD CUNNANE

PLAINTIFF

AND

SHANNON FOYNES PORT COMPANY

DEFENDANT

Judgment of Finnegan P. delivered on the 7^thday of March 2003

This action concerns the sale of premises Aras Ide, Foynes, Co. Limerick ("the premises"). The Relator occupies a portion of the premises as tenant to the Defendant and has done so from the 1 ^s' November 1993 under a series of short term lettings from the Defendant's predecessors in title the Foynes Port Trustees and Foynes Port Company. His original take was two rooms but within one year this was increased to three rooms and then to four rooms. These have now been occupied under a lease for a term of three years from l" July 1999 at a rent of £1,000 per annum. As to the remainder of the premises portion was occupied by the Defendant and other portions under short leases - a doctor, SIPTU, an Irish College, a hair salon, an accountant, an offshore supply company. Other portions were occupied rent free by Customs and Excise and Alcoholics Anonymous. The offshore supply company also occupied part of the premises being a bonded warehouse again on short lease. Finally portion of the premises was occupied by Foynes Flying Boat Museum ("the museum") for a term of 21 years from 1988 at a rent of £1,000 per annum subject to reviews no reviews having in fact been imposed. The premises were originally an hotel and then the terminal for transatlantic flying boats and housed the Shannon Hotel School.

By agreement in writing dated the 11'" May 2001 the Defendant agreed with the museum for the sale to it of the premises for the sum of £250,000. The premises were not marketed in that they were not advertised, or offered for sale by tender, by auction or by private treaty.

The relief sought by the Relator is to have the agreement for sale to the museum set aside and the premises offered for sale on the open market when it would be his intention to bid for the same. The grounds upon which he seeks that relief may be summarised as follows -

The Harbours Act 1996 section 15(2) requires the Defendant to go to the open market on the sale of its property.

(2) The Defendant is obliged to comply with Government policy on good governance which requires a sale on the open market.

(3) The sale price is less than open market value.

(4) The Defendant in selling its property is in the position of a trustee and in relation to the sale of its property has the obligations of a trustee; which obligations require a sale on the open market.

By way of further background the premises were originally held by Foynes Harbour Trustees. Foynes Port Company was incorporated pursuant to the provisions of the Harbours Act 1996 and succeeded Foynes Harbour Trustees. Pursuant: to the Harbours Act 1996 section 43 as inserted by the Harbours (Amendment) Act 2000 section 1 the functions of Foynes Port Company and Shannon Estuary :Ports Company were transferred to the Defendant by the Transfer of Functions of Foynes Port Company and Shannon Estuary Ports Company Order 2000 (S.I. 283/2,000) effective on the 18^th September 2000.

While the decision to sell the premises was taken by the Defendant discussions in relation to the sale spanned the periods during which Foynes Port Company and the Defendant owned the premises. Minutes of meetings of the Board of hlirectors of Foynes Port Company disclose the following. At the meeting of the 21⁵` September 1999 it was recorded that the Chief Executive had received a verbal approach from the museum to purchase the premises. There had been several previous approaches. The decision was made to obtELin a valuation of the premises and to ascertain the cost of providing alternative accommodation in the event of a sale. The minutes of a meeting of the Directors held on the 16^th November 1999 records the following -

"The Chief Executive stated that De Courcy's completed a valuation on the entire harbour office building, and they submitted a low valuation. The Chairman suggested that the ChiefExecutive clarifies the situation with De Courcy's and also do a comparison between the valuation and a former valuation done in connection with our assets valuation ".

The asset valuation referred to was as of the 26^th November 1996 and valued the "service buildings, offices„ stores, canteens etc., constructed over the past twenty five years" at £500,000. While: this item it would appear included other small buildings such as offices on the east jetty, an office on the west jetty, a further office and an office and garage totalling in area some 3,000 square feet in all it did not include the warehouse which is part of the premises which also comprises 3,000 square feet: the evidence was that accordingly the valuation of £500,000 under this heading represented the value of the premises. The valuation was not carried out by a valuer but rather by the then Chief Executive of the Trustees, Mr. O'Malley, and the Trustees engineer, Mr. Murphy. The valuation was arrived at by applying a value of £25 per square foot to the total area of 20,000 square feet. The figure of £25 per square foot was provided by Mr. O'Malley and he derived this figure from the cost to him of a dwelling house which he purchased in Foynes some time previously. The asset valuation was required for the purposes of ascertaining the nominal value of shares to be allotted to the Minister in Foynes Port Company pursuant to the Harbours Act 1996 section 19.

The minutes of a meeting of the Board of Directors held on the 25^th November 1999 disclose the following. The museum had available to it £200,000 - £25(),000 by way of Government grant but had to take up this money before the end of 1999 or otherwise it would go bath to the exchequer. Representations on behal .-' of the museum had been received from Shannon Development: in the course of evidence I was given no information as to these representations. The Chief Executive informed the Board that the low valuation put on the premises by De Courcy's had been influenced by the low rental income from the premises.

The next meeting of the Board of Directors was on the 21" December 1999 and a proposal from the museum to purchase the premises was presented by the Chief Executive. The Board agreed to discuss the sale of part or all of the pr,;;mises to the museum. The museum in a letter to the Chief Executive had stated than. existing agreements with tenants would be honoured. At the next meeting of the Board of Directors held on the 25^th January 2000 a sub-committee was appointed to meet with a sub-committee from the museum. A meeting did indeed take place but the sub-committee did not report back to the Board. At the meeting with the museum sub-committee Mr. Sheahan a member of the Foynes Port Company sub-committee suggested a price of £400,000: this sum Mr. Sheahan told me in evidence was the cost of new custom designed premises for Galway Harbour Company and was his estimate of the cost of new premises for Foynes Port Company rather than a valuation of the premises.

The Implementation Board of the Defendant met on the 27^th October 2000. The minute of that meeting records as follows:

An option to sell the Foynes Port Company building is now open to the Flying Boat Museum people who are supported by the Minister for Arts etc. An off :'r of £250, 000 is being made for the building and the Department of Arts are keen for movement. Councillor Sheahan recommended an independent valuation of the property, and some tough negotiations i^, the company is to sell its offices in Foynes. .Mr. Moran of J. L. La S, (Jones Lang La;,-alle) above will be requested to provide same.

The Implementation Board again met on the 16^th November 2000 and the minutes of that meeting record as follows:

"Premises

Sale of Foynes offices

Following the review of the minutes of the previous meeting, the principal item raised for discussion was the sale of the present Foynes offices to the Flying Boat Museum for £250, 000. This motion was proposed by Kevin Sheahan and seconded by Pat Keane on the understanding that the employees of the Port can remain in the building on a lease of £I/year until such time that they are ready to move to new premises. .q number of points were put forward in favour of this option:

Reflection of good will to people of Foynes as the proposed development would contribute significantly to the development of tourism in the area.

The Port Company^, would be relieved of the burden of the nine existing leases at the building as these would be included in the sale.

The sum offered is considered to be quite reasonable when compared to the recent valuation o)^-the property (Summer 2000) by de Courcy's of £210, 000 ".

The reference to a valuation of de Courcy is to a valuation as of 12^th November 1999 (rather than in Summer 2000): the valuation was in fact £230,000. This last error was acknowledged by Mr. Grey, Joint Chief Executive of the Defendant as his and it was an error in recording: the true figure £230,000 was available and discussed at the meeting. At its meeting of the 8^thMarch 2001 the Implementation Board confirmed the decision to sell the premises to the museum at £250,000. As already mentioned an agreement for sale was entered into on the 11^th May 2001 as of which date the Defendant became contractually bound.

The Statutory Framework

The relevant statutory provisions are contained in the Harbours Act 1996 and are as follows -:

12. (1) It shall be the general duty of a company -

(a) to conduct its affairs so as to ensure that the revenues of the company are not less than sufficient taking one year with another to -

(i) meet all charges which are properly chargeable to its revenue account,

(ii) generate a reasonable proportion of the capital it requires

(iii) remunerate its capital and pay interest on and repay its borrowings.

(b) to conduct its business at all times in a cost effective and efficient manner

(c) to regulate operations within its harbour

(d) to have due regard to the consequences of its activities on the environment, the heritage (whether natural or manmade) relating to its harbour and the amenities generally in the vicinity of its harbour.

(2) Nothing in section. l f or this section shall be construed as imposing on a company, either directly or indirectly, any form of duty or liability enforceable by proceedings before any court to which it would not otherwise be subject.

15. (1) A decision by a company to acquire any land or to dispose of any of its land (whether by sale or the grant of a lease) shall only be made by the directors of the company.

(2) The consideration for which any land is sold by a company shall, in so far as is practicable, not be less than its open market value.

(3) The rent to be reserved under a lease of land granted by the company shall be of an amount not less than the open market value rent obtainable for that land save that a rent of below such an amount may be reserved under such a leas;; if -

(a) in case any business or trade is to be carried on at the land, the company considers that, having regard to -

(i) the amount of business or trade that is likely to be transacted at the land, or

(ii) the effect the granting of the lease is otherwise likely to have on the amount of business or trade transacted in its harbour,

it is appropriate to reserve a rent at below such an amount, or

(b) in any other case the Minister consents to the reservation of a rent at below such an amount.

(4)(a) In deciding whether to acquire any land or in deciding the consideration it shall pay for the acquisition of any land, a company shall have regard to any Government policy or guidelines in relation to the acquisition of land by State enterprises which is or are for the time being extant.

(b) Without prejudice to paragraph (a), where a company proposes to acquire land it shall cause a valuation of the land to be made by an appropriately qualified independent person.

(c) In this subsection "State enterprise" means a company (within the meaning of the Companies Acts) one or more shares in the shareholding of which is held by a Minister of the Government and the principal objects of which (as stated in its memorandum of association) are prescribed in whole or part by statute.

44 - (1) The Minister may, after consultation with the company, give a direction in writing to a company requiring it to comply with policy decisions of a f eneral kind made by the Minister in relation to -

(a) the development of harbours,

(b) the safety of ships, navigation and operations generally in harbours,

(c) the levels of harbour charges imposed by a company or companies,

(d) the acquisition or disposal of lands by a company or companies (including by way of the grant of a lease), or

(e) any other matters affecting the functions of a company or companies.

(2) A company shall comply with a direction given to it under subsection (1).

(3) Subsection (1) shall not be construed as enabling the Minister to exercise any power or control in relation to the performance in particular circumstances by a company of a function conferred on it by or under this Act."

Particularly relevant to the; issues in this action are the provisions of section 12(1)(d) if the premises are part of the manmade heritage relating to Foynes harl:>our or the amenities in its vicinity, the requirement in section 15(2) that the consideration for which any land is sold shall in so far as is practicable not be less than its open market value and the provisions of section 15(4) which in its terms relates to the acquisition of land and not to the disposal of land by State enterprises and which requires regard to be had to any Government policy or guidelines for the time being extant. Section 44 is relevant so far as Government guidelines on good governance were communicated to Foynes Port Trustees, Foynes Port Company and to the Defendant as hereinafter mentioned.

Government Guidelines on Good Governance

By letter dated the 23`^d January 1997 addressed to Foynes Harbour Trustees the predecessor of Foynes Port Company the Minister forwarded the latest draft of the Corporate Governance Framework Document. The Framework Document in summary stated that port companies (and at that date specifically Foyn:;s Port Company) were expected to comply, within the framework of the Harbours Act 1996, with the requirements sets out in the Guidelines for State Bodies and in particular the guidelines relating to procedures for the disposal of assets. The Framelv-vork Document in Appendix 2 ;3et out a number of documents relating to corporate governance which together with other documents constituted an information file to be given to each new director of a port company. The Framework Document together with the information file was in fact circulated to all the Directors of Foynes Port Company. As a matter of probability I am satisfied that Shannon Estuary Ports Company received a similar communication and as a matter of probability the information file was likewise circulated to its Directors. The Implementation Board of the Defendant comprised a number of Directors from each Foynes Part Company and Shannon Estuary Ports Company. The following documents included in the information file are of relevance -

(1) Corporate Governance Framework Document

(2) Department of Finance Guidelines for State Bodies

(3) Public Procurement 1994 Edition

(4) Report of Task Force Established to Review the Controls in the Commercial State Companies Operating under the Aegis of the Minister for Transport, Energy and Communication

The Corporate Governance Framework Document provides that port companies are expected to comply with the requirements set out in the Guidelines for State Bodies. The Department of Finance Guidelines for State Bodies do not deal with disposal of properties. Public Procurement 1994 Edition at 1.2 provides as follows -

"The disposal or letting of "property should be dealt with by competitive tendering or by auction. This approach provides a disposal mechanism which is both transparent and is likely to achieve a fair price. If contracting authorities propose to deviate from this general principle the prior approval of the Department of Finance must be obtained.

Public Procurement 1994 :Edition in its introduction provides that commercial State bodies should comply with the broad principles of the Government contracts procedures. The Report of the Task Force (October 1995) deals with the disposal of assets in chapter 6 as follows –

6.1.21994 Public Procurement Book

This recommends that disposal of property should normally be dealt with by competitive tendering or by auction and

6.4 Given the fact .that disposals, while not being significant in terms of quantity, are in certain instances individually very significant, the Task Force considers it appropriate that guidance be provided.

6.4.1 The guidelines should include a general procedure indicating that assets should be sold on the open market by means ofpublic auction _or competitive tender, other than in exceptional circumstances which require 1:'oard approval. In the case of property, all disposals should be by open competitive tendering, auction or private treaty sale (following advertising). The approach should be to provide a disposal mechanism which is both transparent and is likely to achieve a fair price ".

The Committee of Public .Accounts examined the Special Report of the Comptroller and Auditor General to the Department of the Marine and Natural Resources on the Sale of State Lands and reported to Dail Eireann on the 15^th April 19991. The Report made a number of recommendations on the manner in which the sale of State properties should be conducted and proposed that the guidelines set out in the booklet "Public Procurement - 1994 Edition" be observed. It recommended that for the future where it is not proposed to dispose of State assets by public tender or auction, or where a public tender or auction process is used and it is proposed not to accept the highest bid, clear reasons for this departure from standard practice should be recorded. The Minister wrote to the Defendant on the 16"' November 2002 setting out that recommendation. The letter proceeded as follows –

"Accordingly in order to give effect to the recommendation, your attention is drawn to the existing guidelines and the need for suitable arrangements to be in place to ensure maximum compliance. I enclose for your information a copy of the Department of Finance letter of I S June 1999.

In order to give effect to the recommendation to the Committee of Public Accounts the Minister desires to have the provisions set out in the guidelines contained in the booklet Public Procurement-1994 Edition applied by the Board as a matter of policy. The Minister proposes to give a direction in writing to the company in accordance with section .l4(1)(d) of the Harbours Act 1996 requiring .it to comply in this matter and requires your Board's confirmation or observations on this matter by 17^th December 2000 so that a direction may be formally written into the record of the Board".

The letter from the Department of Finance of 18 June 1999 referred to related to State properties and disposals by Government departments or offices: it required that where no public auction or other competitive process had been followed or following such a process it was proposed not to accept the highest offer the contract should be submitted to the Government Contracts Committee for approval. The :Defendant is not a Government department or office and does not require Government Contracts Committee approval. The: letter also required compliance with Public Procurement - 1994 Edition. The letter concluded as follows –

"In regard to the disposal of assets by agencies other than Government` Departments or offices (which do not come within the remit of the Government Contracts Committee) Accounting Officers should draw the attention of any such agencies for which they are responsible to existing guidelines and the need for suitable arrangements to be in place to ensure maximum compliance ".

Discussion

The Relator's first submission is that the Harbours Act 1996 section 15(2) requires the Defendant to go to the open market on the sale of its property whether 1_)y tender or auction or in the event of a sale by private treaty by advertising or canvassing persons likely to be interested incladed among whom would be the existing tenants.

In support of this submission reliance is placed on a number of cases. Firstly relied upon is Holohan v Friends Provident and Century Life Office 1966 I.R. 1. This case concerned a challenge by the Plaintiff mortgagor to a sale by the Defendant mortgagee of premises subject to tenancies and notwithstanding the advice of its estate agent that a sale with vacant possession would secure a better price refusing to consider such a sale. It was there held that a mortgagee exercising a power of sale should take all reasonable steps to secure the best price. However it was not there held that this could only be done by a sale on the open market as contended for by the Relator and how the duty can best be discharged will be a matter to be determined in the circumstances of the particular case. Next the Relator relied upon In re Edenfell Holdings Limited 1999 1 IR 443. Counsel for the Relator drew my attention to the circumstance that the Receiver in this case had tested the market before entering into an agreement for sale by private treaty and this is indeed correct. However the basis of the challenge to the Receiver's conduct was that he had entered into that agreement without affording an opportunity to other interested parties to make an improved offer and the Supreme Court having regard to the particular circumstances of^-.'that case held that it was reasonable to do so. Again the case is not authority for the proposition that a Receiver must test the market although that was indeed done.

The Plaintiff further relies on a number of Revenue cases where for taxation purposes regard is had to the price which property would fetch "if sold in the open market". In each case it was held that in assessing value on that basis it is to be assumed that the premises are appropriately marketed. The cases are concerned with an opinion as to open market value and it is nowhere suggested that in order to arrive at such an opinion it is necessary that the premises should in fact be marketed. See Inland Revenue Commissioners v Clay 1914 3 KB 466 and Ellesmere v Commissioners of Inland Revenue 1918 2 K.B. 735.

Thomkins and Another v Commission for the New Towns (1989) 1 EGLR 24 concerned a sale by New Towns Commission there being a prohibition on disposing of property for a consideration less than the best reasonably obtainable except under authority of the Secretary of State. The Secretary of State had issued guidelines which had no statutory force but which had been issued in the general expectation that they would be observed. The guidelines provided that former owners of lands compulsorily acquired should generally be given a first opportunity to repurchase the land at a price agreed with the District Valuer on the basis of full current open market value. The Commission decided to dispose of the land by offering it for sale in the open market and without giving the Appellants, former owners from whom the land had been compulsorily acquired, first refusal. The Appellants sought Judicial Review of the Commission's decision and failed both at first instance and before the Court of Appeal the argument being made on their behalf that the Commission had erred in misconstruing its powers. The decision turns on the relationship between statutory provisions and guidelines in the circumstances of the particular case. The judgments discuss the difficulty that can exist in relying on an opinion as to the consideration which is the best reasonably obtainable and it was accepted in the circumstances of that case that the reasonable and sensible course for a chartered surveyor advising a vendor would be to advise that the land be offered for sale by tender after maximum advertisement and publicity on the basis that any successful tenderer would be bound to enter into a contract to purchase on terms laid down in the conditions of tender. However the case was not argued on the basis of the Wednesbury Principle but rather on the basis that the Commission had erred in law by misconstruing its powers under the statute and the guidelines issued by the Secretary of State. But while the case is authority that it may be a reasonable and sensible course to dispose of :land by offering the same on the market it is not authority for the proposition that an ex pert opinion on valuation cannot be relied upon because it is difficult for a valuer to formulate such opinion. In any event there is a difference between the phrase which the court had to consider in this case - "the best consideration reasonably obtainable" -- and the phrase "open market value" with which I am concerned. Of some relevance here is the acknowledgement in the judgments that a vendor under a statutory power with statutory constraints on that power could have regard to considerations of prudence such as that "a bird in the hand may on occasion be worth more than two in the bush" and to which I will refer hereafter.

R v Essex County Council Ex Parte Clearbrook Contractors Limited a decision of the Queens Bench Division 3^rdApril 1981 was concerned with the same phrase - "a consideration less than the best that can reasonably be obtained". In the circumstances of that case; it was held that the Respondent had a duty to probe or explore rival bids to that which it had determined to accept and do so to a reasonable extent notwithstanding that it had a moral objection to the practice of gazumping. See also in this regard Van Hool McArdle v Rohan Industrial Estates Ltd. and Another 1980 I.R. 327. where the obligation of a liquidator was held I;o be to obtain the maximum price. Again I find no assistance in these cases on the issue which I have to determine although the judgment in the Essex County Council case contains dicta relevant to the fourth ground relied upon by the Plaintiff.

Finally the Plaintiff laid great stress upon the decision of the Court of Appeal in Banaue Bruxelles Lambert SA v Eaele Star Insurance Companv Limited & Others 1995 2 All E.R. 769. The facts in that case were that the Plaintiff bank had made a series of loans upon the security of property and the first Defendant Eagle Star provided 100% insurance cover by way of mortgage indemnity guarantee against any loss sustained by the Plaintiff on the loans. The fifth Defendant provided valuations of the properties all of which valuations exceeded the purchase price of the properties. The borrowers defaulted and the properties proved inadequate security. The Plaintiff and the first Defendant compromised and the first Defendant in the action then sought to recover from the fifth Defendant. In the course of the judgment in the Queens Bench Division Philips J. considered the principles to be applied in making a valuation of open market value as defined in the Royal Institute of Chartered Surveyors Guidance Note. The Note defines open market value –

1.1 "Open market value" means the best price at which an interest in the property might reasonably be expected to be sold at the date of the valuation assuming:

(a) A willing seller.

(b) A reasonable period in which to negotiate the sale taking into account the nature of the property and the state of the market

(c) That values will remain static during that period.

(d) That the property will be freely exposed to the open market

(e) That no account will be taken of any additional bid by a purchaser with a special interest".

Thus a valuation of open :market value is based on a number of assumptions - not facts. In particular it is on the assumption mentioned at (d) above. It is in this light that the passage in the judgment upon which the Relator particularly relies is to be understood –

"When a property is properly marketed on the open market it is axiomatic that the price which it realises represents its open market value at the time that price is agreed. Where market value cannot be established in this way, it can only be estimated by comparison with prices achieved by similar properties sold on the open market ".

Again this decision does not support the Plaintiff s contention that the appropriate way to ascertain open market value is by a sale on the open market or by testing the market: rather it recognises that open market value can be ascertained upon the basis of expert opinion.

In the present case I accept the evidence of Thomas A. Dunne who is the Senior Lecturer and Head of School of Real Estate and Construction Economics at Dublin Institute of Technology. The word "value" when preceded by the word "market" or "open market" is generally used to convey a concept of the price that might be expected if a particular property is offered on the open market for sale by someone willing to sell at whatever price would be offered by a purchaser who is not constrained to buy the property. In arriving at an opinion a valuer must assume a proper marketing campaign: it is not however necessary that a marketing campaign be in fact conducted. In assuming a proper marketing campaign the valuer might have to take into account the desirability, having regard to the size of the property and other factors, the possibility of splitting the property into lots that would best suit prospective purchasers and an opinion on value should reflect this. The: valuer should take into account all the circumstances relevant to the particular property including the yield which a purchaser would expect in the case of investment property and the prices achieved on the sale of comparable property whether sold as investments or with vacant possession. Again depending on the nature of the property it may be appropriate to have regard!, to the cost of construction or other measures. Where comparables are not available valuation can be very difficult but is nonetheless possible: in such circumstances valuers can differ by very significant amounts. "Best price" means just that: it does not mean a fair price or anything less than the best price.

The absence of comparables does not make it impossible to arrive at an opinion as to open market value. Mr. Dunne introduced in evidence the Royal Institute of Chartered Surveyors Practice Statement which he adopted. I accept as, relevant and correct the following statement therein -

"Generally, open market valuations are based on evidence of open market transactions in similar properties. A valuation, however, is an exercise in judgment and should represent the valuer's opinion of the price which would have been obtained if the property had been sold at the valuation date on the terms of the definition of open market value. The valuer is not bound to follow evidence of market transactions unquestioningly, but should take account of trends in value and the market evidence available to him whether or not of directly comparable transactions, adjusting such evidence to reflect the OW definition and attaching more weight to some pieces of evidence than others according to the valuer's judgment. It is seldom that a valuer has evidence of contemporaneous transactions in precisely similar property to that being valued. The art of valuation often involves subjective adjustments to evidence oj^, transactions which are not wholly comparable together with interpretation of trends in value. A valuer must exercise skill, experience and judgment in valuing and in making such adjustments and comparisons, even to the extent of making an open market valuation (of a property for which it is thought there would have been a market) in the absence of any direct transaction evidence.

I am satisfied that it is sufficient compliance with the requirements of the Harbours Act 1996 section 15(2) for the Defendant to obtain an expert valuation on the basis of open market value and solar as is practicable to sell premises at not less than that valuation. It may of course determine to carry out the disposal by a sale on the open market whether by tender, auction or private treaty but it is not required by section 15(2) to do so. Indeed it may be imprudent to go to the market and in this regard I have regard to the "bird in the hand" comments in R v Essex County Council Ex Parte Clearbrook Contractors Limited and in Buttle and Others v Saunders and Another 1952 All E.R. 193. Here the Defendant had an interested purchaser at £250,000. If the premises had gone to auction and the best bid was in a. lesser amount or indeed no bid whatsoever was forthcoming could it be sure that the offer of £250,000 would still be available from the museum? I am not called upon to decide whether or not the Defendant's decision was the most prudent but only whether it was in accordance with the statutory requirement and I am satisfied that the course adopted complied with the statutory obligation. In Inland Revenue Commissioners v Clay in considering the somewhat different terms of the Finance (1909 -10) Act 1910 section 25(1) the court thought it appropriate to take into consideration a special purchaser such as an adjoining owner to whom land would be worth more than it would to anybody else. The Royal Institute of Chartered Surveyors in its definition of open market value excludes consideration of a purchaser with special interest. This apparent conflict resolves itself however when the definition of open market value is considered in the light of paragraph 4.2.18 of the Practice Statement and in particular (e) and (f) thereof –

"4.2.18 (a) The definition of Open Market Value requires the assumption that no account is taken of any additional bid by a prospective purchaser with a `special interest'.

(b) A purchaser with a `special interest' (sometimes referred to as a `special purchaser') may be defined as one to whom the property, or the interest in the property, being valued has a particular attraction which it does not have for the market in general. The special purchaser is, in almost every case, the owner of either:

(i) an interest in land which has or could have a particular relationship with the property concerned, e.g. the owner of an interest in a nearby or adjacent property; or

(ii) another interest in the property being valued, e.g. a superior landlord or an under-tenant.

(c) There is no certainty that the special purchaser will be prepared to make an offer to purchase the property or interest in the property at the date of the valuation, and it is therefore correct to exclude his additional bid from the Open Market Value. However, if the special purchaser is in the market he can usually afford, or be willing, to pay more than any other purchaser, and if he enters the bidding, he may reasonably be expected to succeed in purchasing the property - certainly in theory - by paying `one bid more' than any other purchaser. In practice, it is often difficult to quantify the special purchaser's additional bid since he may not need to go to the level he could afford to bid in order to secure the property. On the other hand, in determination to secure the property, he may overbid by a margin greater than necessary.

(d) A purchaser who is simply prepared to pay a high price is not necessarily a special purchaser. Neither is someone who is a known purchaser of the particular class of property being valued, nor someone who is an active purchaser of property in the locality. A, purchaser who is only one of a class of purchasers to whom the property has particular interest would not be regarded as a special purchaser, e.g. tax immune funds which purchase short leasehold investment property. Generally, for a prospective purchaser to be a special purchaser there will be an element of additional potential value which is unique to him.

(e) A superior landlord or a sitting tenant may be a special purchaser because the merging of the two interests might liberate "marriage value' which would justify a higher price than any other purchaser could afford to pay. It must be remembered, however, that the price which a non-special purchaser would pay might include some part of that marriage value because of the hope that the non-special purchaser might eventually be able to re-sell to the special purchaser at an inflated price. Thus `hope value' and `marriage value' may legitimately be included in Open Market Value to the extent that offers from non-special purchasers in the open market themselves reflect those elements of value, as in practice they often do. It is only the additional bid of the special purchaser which has to be excluded from the Open Market Value.

(f) the definition of Open Market Value does not require the Valuer to ignore the existence of the special purchaser, but to take no account of that special purchaser's additional bid, i.e. the amount by which his offer might exceed offers made by non-special purchasers. In practice, the existence of a special purchaser may affect (usually to a limited degree) the level of offers made by non-special purchasers and, to that extent, may be taken into account in arriving at Open Market Value."

I am satisfied on the evidence of Mr. Dunne that in construing the phrase "open market value" in the Harbours Act 1996 section 15(2) it is appropriate to give the phrase the meaning which is current among practitioners in valuation which is that in the Royal Institute of Chartered Surveyors Practice Statement.

One further matter arises f:or consideration. The Defendant became bound to the purchaser on the 11^th May 2001. On the 12^th October 2001, at which date the sale had not been completed, the Defendant received a fax from Colm Burke & Company Solicitors, acting in trust for an undisclosed principal, offering a sum o^,,11,300,000 for the premises subject to contract, good title and satisfactory surveyors report. Had this offer been received prior to a concluded and binding agreement having been entered into it may well be that having regard to the decisions in Holihan v Friends Provident and Century Life Office, and Re Edenfell Holdings Limited in this jurisdiction the Defendants would have been obliged to reconsider the decision to sell at £250,000. Even then however prudence would have required that the Defendant have regard to the "bird in the hand": R.V. Essex County Council Ex Parte Clearbrook Contractors Limited and Buttle & Others v Saunders and Another (1950)2 All E.R. 193. It must be noted that the increased offer was conditional. In any event at the date of receipt of the increased offer the Defendant was contractually bound and accordingly not in a position to consider further offers.

I next propose to deal with the Relator's second ground - that the Defendant is obliged to comply with Government policy on good governance and is accordingly required to sell the premises on the open market.

Government guidelines on good governance cannot override the express provisions of the Harbours Act 1996. Section 15(4) requires the Defendant to have regard to any Government policy or guidelines in relation to the acquisition of land by State enterprises (as defined) in deciding whether to acquire any land or in deciding the consideration it shall pay for the same. It does not require compliance with Government policy or guidelines in relation to the disposal of land. The Harbours Act 1996 section 44 enables the Minister to give a direction in writing to a port company requiring it to comply with policy decisions of a general kind in relation to the disposal of lands: no direction pursuant to section 44 to have regard to Government policy or guidelines on the disposal of property had been given at any time relevant to these proceedings. In any^, event the requirement to have regard to is not a requirement to comply with Government policy or guidelines. In Glencar Exploration plc v Mayo County Council 1200211 IR 85 Keane C.J. stated at page 142:

"The fact that it is obliged to have regard to policies and objectives of"the Government or a particular Minister does not mean that, in every case, it is obliged to implement the policies and objectives in question. If the Oireachtas had intended such an obligation to rest on the planning authority in a case such as the present, it would have said so ".

The information file furnished to directors of port companies contains documents which insofar as they deal with the disposal of lands are not entirely consistent one with another. Public Procurement 1994 provides that commercial State companies should comply with the broad principles of Government contracts procedures and recommends that disposal of property should normally be dealt with by competitive tendering or by auction. Where it is proposed to deviate from that course prior approval of the Department of Finance should be obtained: this requirement however is directed at Government Departments, local and regional Authorities ,and other bodies dependant on State funding and is not directed to commercial State bodies such as the Defendant. Thus the requirement of the Report of the Task Force (October 1995) in dealing with the disposal of assets recommends a general procedure that property should be sold on the open market by means of public auction or competitive tender other than in exceptional circumstances which require Board approval. So far as Board approval is concerned this does not apply to the Defendant as the Harbours Act 1996 section 15(1) provides that a decision by a port company to dispose of land shall only be made by the Directors. The Report of the Task Force which is concerned with commercial State companies further recommends that in the case of property all disposals should normally be by open competitive tendering, auction or private treaty sale following advertising: see paragraphs 6.1.2 and 6.4.1 thereof. The Report of the Committee of Public Accounts following its examination of the Special Report of the Comptroller and Auditor General to the Department of the Marine and Natural Resources on the Sale of State Lands recommended that the wile of State lands should be conducted in accordance with the guidelines in Public Procurement - 1994 and that where it is riot proposed to dispose of State lands by public tender or auction clear reasons for the departure from the standard practice should be recorded. It is clear from the Minister's letter to the Defendant dated 16^th November 2000 that the view taken by the Minister was that the appropriate procedure for the Defendant is that recommended in the Report of the Committee of Public Accounts. While the Board Meeting of the Defendant at which the relevant decision was taken was held on the 16^th November 2000, and presumably prior to receipt of the Minister's letter, the Board in fact complied with these recommendations and set out its reasons for departing from the recommended procedure.

The first reason given is that the sale to the museum is a reflection of good will to the people of Foynes as the proposed development would contribute significantly to the development of tourism in the area. I am satisfied on the evidence given before me that this reason is soundly based on fact. The museum is the only tourist attraction in the area and attracts an appreciable number of visitors to the town of Foynes. Again having regard to the provisions of the Harbours Act 1996 section 12(1)() it is an appropriate reason to which the Defendant should have regard. The premises themselves are part of the manmade heritage in the vicinity of the harbour being the original flying boat terminal and the location of the Shannon Hotel School where I am told Irish coffee was invented. The museum is an amenity in the vicinity of the harbour. As to the second reason that the sale would relieve the Defendant of the burden of the nine existing leases only one lease was proved in evidence before me and that was the lease to the Relator dated 16^th December 1999 and that lease does not contain any unusual or onerous covenant on the part of the Defendant. However I have evidence that the premises will require substantial ongoing expenditure on maintenance and repair over the years and that in commercial terms the rents are low. It is also clear that most if not all of the tenants had acquired rights to either a new tenancy or compensation under the Landlord and Tenant Acts. This evidence satisfies me that it is reasonable to regard the leases as a burden in that the rental return is disproportionately low in relation to the cost of repairing and maintaining the premises. The third reason that the sum offered is quite reasonable when compared to the de Courcy valuation (.1E230,000) is, subject to what I say about that valuation hereafter, also a good reason for departing from the standard practice recommended by the Committee of Public Accounts.

In view of the foregoing the Relator fails so far as he seeks to impeach the sale on the grounds of a failure to comply with Government guidelines.

The Relator's third ground is that the sale price is less than the open market value. Ms Margaret O' Shaughnessy the Curator of the museum referred in evidence to a valuation dated 20^th March 1995 received by the museum from Rooney Auctioneers (Limerick) Limited. It is not clear from her evidence or from a careful perusal of that valuation whether it relates to the entire or part only of the premises but from a careful perusal of the same it appears to me that it does not include in the valuation the bonded warehouse which forms part of the premises. In view of its date and the uncertainty in which I am left as to what was in fact being valued I prol;1ose disregarding the same. Mr. Tom Murphy of Sextons Auctioneers Limerick gave evidence on behalf of the Relator that the value of the premises as at 20th November 1999 (the Board's decision to sell having been made on the 16^th November 1999), the 11th May 2001 (the date of the contract for sale) and the 27^th July 2001 (the date of Mr. Murphy's inspection) was £395,000. For the purposes of the valuation he had regard to the Royal Institute of Chartered Surveyors Guidance Notes. He valued the premises in four separate lots and the figure of £395,000 is the cumulative value of the four lots. Lot 1 comprises that portion of the premises occupied by the Defendant and the portions let to Dr. Tagney, SIPTU, the Irish College, the hairdressing salon, the Relator, an Accountant and Alcoholics Anonymous and the areas occupied by Customs and Excise and Alcoholics Anonymous being rent free. The annual rental income is £5,257 per annum. Lot 2 comprises the bonded warehouse the annual rental income of which is x£3,960 per annum. Lot 3 is the area occupied by the museum the annual rental income of which is £1,000 per annum but with a review due in April 2004. Lot 4 is a yard of 256 square metres which is vacant. Mr. Murphy's evidence is that Foynes is situated some 20 miles west of Limerick on the Limerick to Listowel national road with a population of some 1000 people. Elsewhere in evidence the population was given as 600 but I do not regard this as material. The hinterland is largely agricultural. There are industries within 20 miles examples beirIg the ESB Station at Tarbert, Auginish and Wyatt. It is difficult to find comparables for the premises and for this reason his valuation relied heavily on potential recital income and he had recourse to the Irish Auctioneers and Valuers Institute Annual Property Survey 2000 which gave rents and yields for properties in the Munster area: these yields represent an average across all areas in Munster from urban to rural. He adjusted these yields as he thought appropriate to take account of the particular premises which he had to value and their location From his evidence it is clear that there are no comparable premises in Foynes or that could be ascertained in a comparable location. No comparables are available from other premises sold or let for commercial purposes in Foynes. In these circumstances the approach adopted by Mr. Murphy was both reasonable and appropriate. However I am satisfied that some circumstances affecting the premises were not brought to his attention and that sufficient weight was not attributed to others. The circumstances I have in mind and which were disclosed in evidence are the following:

(1) There is limited demand for commercial premises in Foynes. A. consequence of this is that it could be difficult to find tenants to enable the premises to be fully let or let at an appropriate commercial rent.

(2) The existing lettings are all short term and it is not certain that the existing tenants would be prepared to enter into a commercial lease at a commercial rent for what is the normal commercial term of 35 years. This circumstance would be particularly significant when regard is being had to return on investment as a basis or an element in arriving at an opinion as ^-to open market value.

(3) Where at present vacant the premises are not in a suitable condition for letting and require the expenditure of monies to make them suitable.

(4) The layout within the premises is less than ideal for multiple lettings. The premises were fonnally a hotel and comprise a number of relatively small rooms. In many cases access must be shared. In other cases in order to gain access to rooms it is necessary to pass through other rooms.

(5) The premises were not built with office use in mind and it is probable the flooring throughout will require strengthening.

(6) The present condition of the museum premises represents an investment over the years by the museum of £400,000. While it is probable that the museum would wish to remain in occupation on the expiration of the present lease a new tenancy under the Landlord and Tenant Acts will reflect that expenditure as a deduction from the gross rent. Regard should also be had to the museum's statutory right to compensation for improvements. Mr. Murphy valued this lot upon the basis that he should have regard to a national unimproved condition but was unaware of the actual unimproved condition or of the amount expended by the museum.

(7) Having inspected photographs of the premises I am not satisfie,i that the availability of six,-,ar parking spaces to the front of unit B adds materially to the letting value of unit B as there is very large availability of car parking to the west of the premises.

(8) The vacant yard would appear to have very little potential for development. It forms a courtyard within the premises with restricted access. Access across the same is required to doors leading from the same to other parts of the premises. I am not satisfied as a matter of probability that there; is any realistic prospect of developing the same.

The valuation relied upon by the Defendant and referred to in the minutes of the Implementation Board meeting held on the 16^th November 2000 is that of Messrs de Courcy Estate Agents and evidence was given by Mr. John de Courcy. He valued the premises in two lots the museum premises being one lot which he valued at £20,000 the other lot being the remainder of the premises which he valued at £2;10,000 giving a total valuation of £230,000. In evidence he gave his opinion as to the open market value of the entire premises as at 16^th November 2000 at £250,000. He gives a total rental income as £9,217: in arriving at his valuation he took into account the condition of the building, its potential uses, the rents payable, the potential for higher rates and comparisons. As to the condition of the building he describe(^-.'[ the condition of the museum portion as good, the remainder being mixed some portions good and some bad. The portion which was occupied by the Defendant he described as good but very basic. The premises will constantly require attention. The potential alternative use he saw as use as a hotel, bar or restaurant but saw no demand for this. There is no demand for retail premises in Foynes. The potential for higher rents he assessed at 30% of the existing rents that rent to continue for a period of five years. He proceeded on the assumption that the tenants would have Landlord and Tenant Act rights. He did not accept that the central courtyard was capable of being let. He took as a comparable Mount Trenchard which his company sold in June 1996. This was a large convent building standing on 56 acres. The buildings were in better condition than the premises and more extensive. They were difficult to sell but eventually achieved a price of £422,000.

Mr. de Courcy disagreed with a number of factors in Mr. Murphy's approach. A commercial building with multiple tenants would entail management expenses and an investor would require a higher return. Rather than the yield of 8'/z% suggested by Mr. Murphy an investor would expect a yield of 10%. However Mr. de Courcy did not value the premises on the basis of yield but rather valued them as an existing building. He took into account that because of the heritage associated with the building it would not be possible to demolish the same. In his opinion the fact that the premises were partly occupied by tenants would depress the market value slightly. As was the case with Mr. Murphy, Mr. de Courcy was not aware of the amount which had been expended by the museum on improvements and for this reason it is probable that his assessment of the open market value of this portion of the premises is optimistic particularly when one has regard to the fact that a purchaser with special interest such as the museum should be excluded in determining open market value in accordance with the Royal Institute of Chartered Surveyors Guidance Note. Finally I record a difference between Mr. Murphy and Mr. de Courcy in that Mr.de Courcy's evidence was that the appropriate area to be considered for letting purposes is the net letable area and that Mr. Murphy had taken into account the gross area and in this regard I accept the evidence of Mr. de Courcy. I accept that the valuation of the premises represented a very difficult valuation exercise for the two valuers who gave evidence. I accept also the evidence of Mr. Dunne that where comparables are not available valuers in their opinion of open market value can differ by very significant amounts. In the light of what I have said in relation to the valuations I accept that of Mr. de Courcy - the open market value of the premises at the date of his valuation the 12^th November 1999 was £,230,000 and at the 16^th November 2000 was £250,000 and that the valuation did not alter between the 16^th November 2000 and the 11^thMay 2001. Having regard to what I have said in relation to the same I regard Mr. Murphy's valuation as being to an extent over optimistic. Accordingly the premises I find were sold as required by the Harbours Act 1996 section 15(2) for a consideration that was not less than its market value at the relevant date. It would have been prudent for the Defendant to obtain an up to date opinion on the open market value of the premises in November 2000: as the offer in fact equalled the open market value at that time and at the date of the contract it is not material that it failed to do so.

The Relator's fourth ground is that the Defendant is in the position of a trustee and for that reason in relation to the sale of its property has the obligations of a trustee and which obligations require a sale on the open market. Counsel for the Plaintiff referred me to three cases in support of this submission - Porter v McGill 2002 2 AC 357, Viscount Gort and Others v Attorney General 3 ER 1424, HL and Attornev General v The Mavor Aldermen Burgesses of the Borough of Belfast and Others 1855 Ch 119. All three cases are authority for the proposition that a public power given to a local authority :may only be exercised for the public purpose for which it had been conferred and those members of the authority who exercised such a power otherwise than for such purpose misconducted themselves and are liable to be surcharged or in damages for breach of trust. This being so I see no difficulty in the court granting an injunction to restrain such misconduct. Originally in this action there was a claim for damages which has been discontinued and I think: rightly so. If in the present case property were to be disposed of at an undervalue and the Defendant condemned in damages for the amount of the undervalue the only funds available to discharge the damages would be the Defendant's own funds. If the Defendant is to be regarded as a trustee for its sole shareholder the Minister then damages could only be paid out of the Defendant's funds and in effect they would be paid out of the cestui's own funds which could not be but a futile exercise. Any award of damages would as in the Attorney General v the Mayor Al Ilerman and Burgesses of the Borough of Belfast and Others be an award against the individual members of the Board in accordance with the principles set out in that case the action being taken by the Attorney General at the relation of the Defendant. I am satisfied that the Director's of the Defendant had a fiduciary duty to the Defendant. However unlike the basis of claim in the Borough of Belfast case the Relator here claims on the basis that the Defendant is itself a trustee for the Minister its sole shareholder or for the State. It is unnecessary for me to decide if this is so.

In order to succeed on this ground it seems to me it is necessary that in addition to the express statutory duty imposed by the Harbours Act 1996 section 15(2) the law should impose an additional and higher duty on the Defendant in its capacity as such trustee. I am satisfied that no such additional and higher duty exists. If such a higher duty did exist prior to the enactment of the Harbours Act 1996 then on the true construction of section 15(2) the duty thereby imposed replaces the same. Accordingly I hold that the Defendant has no duty qua trustee as contended for by the Plaintiff.

There is one further matter which was raised in written submissions to which I wish to refer. By letter dated l O^thOctober 2000 the museum wrote to the Minister outlining its interest in the premises. On the 8^thDecember 2000 the museum wrote a further letter to the Minister the opening portion of which reads as follows -

"How can I and the Chairman and Board of Directors of our museum ever thank you enough? You have made gur greatest dream a realisation and we can now look forward to developing this wonderful story of the role played by Foynes in both aviation and maritime history. Dave Glynn from your Department along with Pronsias Kitt and Councifor Kevin Sheahan have given us wonderful support and help in getting this sale agreement in place ".

On the evidence before me the only intervention by the Minister or any of his officials was to forward a copy of a letter dated 10^th October 2000 received frond the museum to the Joint Chief Executive of the Defendant requesting a report on the issues raised in that letter in order that a reply might issue to the same. In response to a question put by me to Counsel for the Relator I was informed that it was not the Relator's case that there was any improper intervention by the Minister or on his behalf. I would merely record that on the evidence before me there was nothing to suggest any improper intervention by the Minister or of his officials or indeed any intervention other than the request for a report which I have mentioned. Likewise no suggestion of any or any improper intervention by Mr. Kitt or Councillor Sheahan was made during the course of the hearing.

Disposition

Having regard to the foregoing I dismiss the Relator's claim.