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[2004] IEHC 391

THE HIGH COURT

[2004 No. 153 S/P]

IN THE MATTER OF THE VENDOR AND PURCHASER ACT, 1874

AND IN THE MATTER OF SECTION 7 THEREOF

AND IN THE MATTER OF THE RULES OF THE SUPERIOR COURTS AND RULE 7 THEREOF AND IN THE MATTER OF AN AGREEMENT MADE 22^ND DAY OF SEPTEMBER, 2003

BETWEEN MARTIN HAND OF THE FIRST PART AND WILLIAM GREANEY OF THE SECOND PART

BETWEEN

MARTIN HAND

PLANITIFF

AND

WILLIAM GREANEY

DEFENDANT

JUDGMENT of Mr. Justice Clarke delivered the 15^th day of December, 2004.

In these proceedings the plaintiff seeks a determination by the court of a series of questions relating to the current status of a contract for the sale of lands dated 22^nd September 2001 between the plaintiff of the one part and the defendant (in trust) of the other part. The plaintiff sold in his capacity as personal representative of the estate of the late Ann Kearney. In the relevant contract it was agreed that certain lands in County Offaly were to be sold by the plaintiff in his capacity as such personal representative to the defendant for a sum of €2,850,000. The agreement was subject, inter alia, to certain clauses and conditions relating to planning permission the interpretation and application of which form the basis of the dispute between the parties which the court is now required to resolve.

It is appropriate, therefore, to set out in full the relevant clauses which are contained in the special conditions to that contract.

They are as follows:-

"7. This sale is strictly subject and conditional, to the vendor obtaining a Grant of full Planning Permission for 93 detached two storey dwelling houses, from Offaly County Council on foot of planning permission planning register reference number PL2/02/470, which said application for such planning permission has been applied for to date via a joint application between Golden Vale Marts Limited and Bridie Lee. Upon the said grant of planning permission issuing from Offaly County Council pertaining to the lands the subject matter of this sale, this sale shall be completed 14 days thereafter and/or 14 days subsequent to the issue of the original grant of probate of the estate of the late Annie Kearney deceased whichever is the latest. Once the said grant of planning permission has issued it is then the responsibility of the purchaser to comply with any/all conditions attached thereto, insofar as it relates to that portion of the lands the subject matter of this sale, and duly comprised in part of Folio 8649 of the Register of County Kings AND also in conjunction with the owners of the neighbouring lands duly owned by Golden Vale Marts Limited in relation to (a) the common entrance, (b) the roundabout and (c) the common services pertaining to this entire development on foot on the entire grant of planning permission planning register reference number PL2/02/470. In that respect the vendor herein must enter into an agreement with the owner/developer of the adjoining neighbouring lands duly owned at present by Golden Vale Mart Limited in relation to the main access road (i.e. the common entrance) roundabout and common/work services affecting the boundaries of each of the respective properties.

19. The purchaser shall not be obliged to close until:-
(a) the final grant of permission has issued from the local authority and An Bord Pleanála satisfactorily in all respects to the purchaser in his absolute discretion and particularly as regards compliance with the section schedule to planning permission reference PL2/02/470 being requirements of the local authority and approval required to be lodged before any development can commence and any other matter.

(b) the vendor shall make all necessary arrangements as per the amendments to condition 7 herein to agree with Golden Vale Marts Limited arrangements satisfactory to the purchaser in his absolute discretion in relation to the services to be constructed for the joint benefit of Golden Vale Marts Limited and the vendor. The purchaser shall be advised of these arrangements as they progress and shall be notified of the arrangements prior to any final agreement being concluded between the vendor and Golden Vale Marts Limited regarding the provision of the services necessary to the development of the lands in sale and adjoining lands of Golden Vale Marts Limited.

21. In the event that conditions 19(a) or 19(b) above are not met to the satisfaction of the purchaser then and in that case the deposit will be returned immediately with interest accruing to the purchaser. If the purchaser confirms that conditions 19(a) and 19(b) are met to his satisfaction then the sale will close not later than 21 days following on the grant of satisfactory permission and conclusion of an agreement with Golden Vale Marts Limited and the issuing of a grant of probate to the estate of Annie Kearney, deceased, whichever event is the later."

The only other material provision to be found in the special conditions is clause 6 which provides that the sale is subject to a grant of probate pertaining to the estate of the late Annie Kearney deceased being extracted as soon as possible.

As appears from the determination of An Bord Pleanála proved in evidence a notification of a decision to grant planning permission by the local authority for a development subject to 33 conditions was issued by the planning authority per order dated 17^th July, 2003.

Thereafter a third party appeal was brought to the planning board as a result of which the Board decided to refuse permission for reasons which are not material to the issues which I have to decide. The factual situation which gives rise to these proceedings emerged in the course of correspondence which passed between the parties subsequent to that refusal of An Bord Pleanála which was made on 17^th December, 2003.

On 16^th January, 2004 the vendor's solicitors wrote to the purchaser's solicitors referring to the then recent decision of An Bord Pleanála to refuse planning permission and went on to state as follows:-

"And with particular reference to special conditions 7, and 19(a) of the contract of sale I now presume that special condition 21 of the said contract for sale will now be invoked".

The purchaser's solicitors sent a holding reply on 19^th January with a more detailed holding reply on 21^st which concluded as follows:-

"Should our client elect to proceed you might indicate to us what the likely closing date would be. Obviously he has to consider the position carefully not only from a planning point of view but also from a bankable point of view".

By letter of 4^th February, 2004 the vendor's solicitors returned the deposit together with interest accrued thereon and gave as the reason for so doing "the fact that on 17^th December, 2003 last An Bord Pleanála refused planning permission for this development; because of this our client is now invoking special condition 21 of the contract for sale by returning to your client the entire deposit along with all interest thereon, thus rescinding this contract for sale in its entirety".

In a reply of 9^th February, 2004 the purchaser's solicitors relied upon the decision of this court in the case of O'Connor v. Coady (to which I will refer later). Based upon that decision it was contended that planning had not yet being received and "currently our clients are considering whether to waive that condition or not". Reliance was also placed upon a contention that by virtue of the determination of this court in the above case a notice to complete was required prior to determination of the contract.

In a further reply dated 25^th February, 2004 the vendor's solicitors referred to special conditions 7, 9, 19, 20, 21 and 22 and specified that condition 19(a) was a condition subsequent and "quite clearly made planning permission a fundamental term". The letter went on to contend that it was common case that such a permission cannot now issue and that the condition further restricts planning to planning reference PL2/02/470. The letter asserted that that condition could never thereafter be complied with and therefore, it was said, the contract stood discharged by the operation of the doctrine of frustration. In the premises therefore, it was asserted that a completion notice could not be served.

By letter of 5^th March, 2004 the purchaser's solicitors indicated on behalf of their client that he was willing to proceed with the purchase. After subsequent correspondence the content of that letter was clarified by a letter of 9^th March which made it clear that the purchaser was purporting to elect to proceed with the purchase "without the benefit of planning permission".

Thereafter proceedings commenced.

Having regard to the arguments addressed at the hearing the only further fact which appears to be of any relevance to the issues in the case is that the grant of probate to the estate of the late Anne Kearney issued on 21^st day of April, 2004.

While a number of issues are raised in the questions in respect of which the court's answer is sought in the pleadings the argument of counsel for the plaintiff concentrated on one line of reasoning. It should be noted that this argument did not follow exactly the contentions raised in the correspondence referred to above. However it is equally clear that the position of the defendant has had to alter from that adopted in that correspondence by virtue of the fact that the decision of this court in O'Connor v. Coady was reversed on appeal by the Supreme Court in a judgment delivered on 21^st day of October, 2004.

It is therefore appropriate to set out the contending positions of the parties before proceeding to issue a determination in respect thereof.

In the O'Connor case the Supreme Court was required to consider the effect of a failure to obtain planning permission within a period specified in the contract (being on the facts of that case a four month period). Planning permission was not obtained within that period and thereafter, by letter, the vendor's solicitors stated that the contract had lapsed "and is at an end". The court held that the relevant letter complied with the requirement for rescission of being a clear notification that the relevant party is treating the contract as at an end. The court went on to note that a condition inserted for the benefit of one party can be waived by that party but that such waiver required a positive act by that party. The court specifically overruled the determination of this court to the effect that it was necessary to serve a completion notice.

While agreeing on the outcome of the case there was a possible difference of opinion between McCracken J. and Geoghegan J. as to whether the contract automatically came to an end (as opposed to being merely voidable) on the failure to obtain planning permission within the four month period specified in the contract. As was pointed out in the course of both judgments that issue was not argued and therefore did not fall for formal determination in the case. However McCracken J. noted that "somewhat surprisingly the appellant has not sought to argue that the contract came to an end immediately on the expiration of the four month period allowed for fulfilment of the condition". On the other hand Geoghegan J. expressed the view that the contract became voidable upon the failure to obtain planning permission within the relevant period.

The Plaintiff's Case

In those circumstances the plaintiff in these proceedings contends that the contract was conditional upon a planning permission being obtained. That as of the date of the refusal by An Bord Pleanála the condition became incapable of performance so as to render the contract either at an end or, at a minimum, voidable. The plaintiff goes on to argue that the letter of 4^th February, 2004 amounts to a clear indication on the part of the plaintiff that he is not bound by the contract. In reliance on the fact that the purported waiver occurred subsequent to both the refusal by An Bord Pleanála and, indeed, the letter of 4^th February the plaintiff argues that the contract was at best voidable subsequent to the refusal by An Bord Pleanála of the planning permission concerned and thus came to an end at the latest on the receipt of the letter of 4^th February.

The Defendant's Contentions

The defendant contends that on a proper construction of the contract and in particular clauses 19 and 21 thereof and with particular reference to the fact that at all material times during February and March 2003 the grant of probate to the estate of the late Annie Kearney was outstanding, the time specified for compliance with the conditions to the contract had not expired. In those circumstances it is argued, in accordance with the principles set out in Aberfoyle Plantations Limited v. Cheng (1960) AC 115 that the date by which the conditional contract required the conditions to be fulfilled had not expired so that the purchaser remained entitled (until the date of the grant of probate) to consider whether to waive the planning clause. On that basis, it is contended, the purchaser retained the right to waive as of the exchange of correspondence in early March where it was, at the very least by 9^th March, made clear that the purchaser intended to go ahead with the contract notwithstanding the refusal of planning permission and without the benefit thereof.

The Decision

It seems to me that the starting point for any consideration of the issues in this case is as to the proper construction of the contract. It is obvious that the precise way in which parties who wish a contract to be "subject to planning permission" may decide to structure the arrangements to that end is a matter for agreement between the parties. Thus the nature of the bargain entered into between the parties in relation to planning is ultimately a matter which requires a proper construction of the terms which they have negotiated and included in the contract. However in general terms it is likely that any effective "subject to planning" clause contained in a contract for the sale of land will have to address a number of matters but two in particular:-

(a) when the contract is stated to be subject to planning what is meant by planning. In this regard it is necessary for any such clause to set out the means by which it should be possible to determine whether planning has in fact been obtained in the manner contemplated. Precisely how this is to be done is a matter for agreement between the parties. In the clause in the instant case it is clear that whether or not the planning permission was satisfactory for the purposes of the contract was a matter to be determined in the absolute discretion of the purchaser. This absolute discretion vested in the purchaser extended to the question as to whether agreements between the vendor and Golden Vale Marts Limited (the neighbouring landowner who had submitted a joint planning application) which were anticipated as being likely to be required to give full effect to the planning permission were also satisfactory. In one sense it might almost be said that the contract, in substance, more resembles an option to purchase given the wide discretion granted to the purchaser by the terms thereof in relation to satisfaction with the planning permission ultimately to be obtained.

(b) The time within which the planning is to be obtained. In almost all of the cases to which I was referred (most of which are reviewed in O'Connor v. Coady), the relevant clause provided that planning was to be obtained within a specified period of time. However the clause in the instant case is quite different in that the contract is stated, in paragraph 7 of the special conditions, to be conditional upon the obtaining of a grant of planning permission "for 93 detached two storey dwelling houses" .. "on foot of planning permission planning register reference number PL2/02/470". Thus the condition in this case was unusual in that it related to a specific planning application rather than leaving that matter at large and imposing a time limit. This is perhaps understandable in the context of the facts of this case where the local authority had already issued a notice of intention to grant planning permission and the parties were, therefore, as of the date of signing the agreement, aware of the specific planning application (and indeed decision of the local authority) to which the contract was being made subject.

As was pointed out by Geoghegan J. in O'Connor v. Coady (following an exhaustive review of the relevant authorities) it is more helpful to consider clauses of this type as being clauses which render a contract unenforceable until such time as the clause has been complied with rather than seeking to make distinctions between what might be termed conditions precedent and conditions subsequent. In that context the established jurisprudence on waiver (which was accepted by both parties) is to the effect that a waiver can only take place up to the date for fulfilling the condition but not later. Maloney v. Elf Investments Limited [1979] I.L.R.M. 253 at 256; Crean v. Drinan [1983] I.L.R.M. 82 at 86. Thus in the case of a planning condition which requires planning permission to be obtained within a specified period of time the combined effect of Aberfoyle (to the effect that time will be of the essence for compliance with a condition in the absence of an express term to the contrary) and the Maloney and Crean cases (to the effect that waiver can only take place up to the time specified for compliance with a condition) is that a party who might contemplate waiving a planning condition can do so up and until the time specified in the contract for compliance with the planning condition but not later.

However the key question in this case concerns the application of those principles to circumstances in which the contract (as here) specifies a specific planning application rather than a general time limit in the relevant condition.

It seems to me that the underlying principle behind the accepted jurisprudence referred to above is that waiver must take place at a time when there is at least a possibility of the contract being completed in accordance with its terms. As soon as that possibility disappears the contract ceases to be capable of being completed in accordance with its terms and waiver becomes impossible. Applying that general principle to the unusual terms contained in this contract it seems to me that compliance with the relevant condition became impossible when An Bord Pleanála refused planning permission. That this was not a matter which the parties had in the forefront of their contemplation can be seen from the fact that while there are carefully drafted clauses concerning what is to happen if the planning permission might be, in the view of the purchaser, unsatisfactory there is no provision expressly dealing with the circumstances which are to prevail in the event that An Bord Pleanála were to allow the third party appeal and thus refuse permission.

However the principle seems clear. Clause 7 in its terms makes the contract conditional upon obtaining a grant of planning permission on foot of the specific application which was, at the time of executing the contract, the subject of a notice of intention to grant by the local authority but subject to appeal to the Board. When the Board refused permission that condition ceased to be capable of being fulfilled.

Against this counsel for the defendant argues that as of late February or early March the contract remained conditional (and thus capable of waiver) by virtue of the fact that the grant of probate had not issued. While it is true to say that clause 21 specifies that closing is to take place not later than 21 days following on the grant of satisfactory permission and conclusion of an agreement with Golden Vale Marts Limited (as would be required to give effect to the permission) and the issuing of a grant of probate which ever be the later it seems to me that that clause is of no relevance in circumstances where the planning aspect of the contract cannot be complied with. The date specified in clause 21 can never occur because there can never be a "grant of satisfactory permission" in the only sense in which that phrase can be interpreted for the purposes of this contract (that is to say a permission on foot of reference number PL2/02/470).

Thus in the absence of a waiver in respect of the planning condition the grant of probate had also become an irrelevance as soon as An Bord Pleanála refused the application.

Therefore whether one treats the contract as having come to an end at that stage (following the tentative views expressed by McCracken J. in Coady) or treats it as merely being voidable (following Geoghegan J.) does not seem to be relevant for the purposes of resolving this case. The vendor gave, in the letter of 4^th February, a clear indication that he no longer considered himself bound by the contract. While the precise contractual clause referred to in that letter does not appear to be, in itself, relevant that does not, it seems to me, take away from the fact that as of that date the purchaser was aware that the vendor was treating the contract as at an end. Given that, for the reasons set out above, the vendor was, in my view, entitled to treat the contract as at least voidable upon the refusal by An Bord Pleanála of the specified application for planning permission, it seems to me that the letter of 4^th of February operates as a notification that the vendor was treating the contract as at an end. As was pointed out by Geoghegan J. in Coady in construing any such notification it is necessary to look at the substance and not the mere form of the letter. Furthermore it is noted (at p. 14 of the judgment) that once "the condition" is not fulfilled within the correct time either party becomes entitled to treat the contract as at an end but is bound to notify the other party that he or she is so treating it. Once such notification, in whatever form, takes place there is no longer a contract in being unless the party purporting to treat the contract as at an end has, in fact, expressly or impliedly affirmed the contract. Mere lapse of time does not necessarily constitute such affirmation, as there would have to be some positive indication that the party otherwise entitled to rescind was treating the contract as still in being.

There is nothing on the facts of this case which could be said to amount to an act on the part of the vendor which might be regarded as treating the contract as still in being.

In those circumstances I am satisfied that at the very latest upon the receipt of the letter of 4^th February 2004 the contract was at an end. As this resolves the substance of the case it is unnecessary to decide whether it was already at an end from the 17^th December 2003 when the Board gave it's decision.

In the circumstances I would propose permitting a further amendment of the special endorsement of claim to seek in the alternative an answer to a further question as follows:-

"Did the contract for sale come to an end not later than the receipt of a letter of 4^th February, 2004 from the vendor's solicitors to the purchaser's solicitors".

I would propose answering that question "yes."

In the light of that answer it is unnecessary to answer any of the other questions. The above question is, in reality, an aspect of the questions already asked.

Approved: Clarke J.