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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Duffy v. Ridley Properties Ltd. & Anor [2005] IEHC 315 (7 October 2005)
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Cite as: [2005] IEHC 315
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Neutral Citation No: [2005] IEHC 315
[2003 No: 13120P]
BETWEEN
PLAINTIFF
DEFENDANTS
SUPPLEMENTAL JUDGMENT of Ms. Justice Finlay Geoghegan delivered on the 7th day of October, 2005.
This judgment is supplemental to a judgment delivered by me herein on 7th July, 2005. In that judgment I refused the plaintiff's claim for an order of specific performance of an agreement in writing dated 7th May, 2003, made between the plaintiff and the first named defendant whereby the plaintiff agreed to purchase and the first named defendant agreed to sell the property described in the particulars therein in consideration of €520,000 ("the Contract") and decided that the plaintiff is entitled to damages in lieu of specific performance against the first named defendant. In that judgment I also left over the determination of the quantum of such damages and sought further evidence in relation to three specific matters which then appeared to me necessary to obtain in order to determine the quantum of damages.
When the matter was re-listed in relation to the time and mode of the additional evidence referred to in my judgment of 7th July, 2005, I was informed by Mr. Whelan S.C. that I had misunderstood the plaintiff's position in relation to his claim for damages in lieu of specific performance and that the plaintiff at all times intended to pursue a claim for loss of bargain based on the increased value of the property since the date of the Contract and sought to adduce evidence of the current value of the property. Mr. Keane S.C. objected to the admission of any evidence other than that referred to in my judgment of 7th July, 2005.
Having heard the submissions of counsel, as the end of term was approaching and I needed to consider such legal submissions, I reserved my decision on the admissibility of the claim for loss of bargain and relevant evidence. Without prejudice to my decision I said I would hear the evidence of value and gave directions for the exchange of reports and hearing of relevant evidence. I heard the further evidence on the 28th July, 2005.
Misunderstanding
Senior counsel for the plaintiff submits there was a serious misunderstanding. In relation to questions I had put at the end of the evidence given for the plaintiff. This occurred on day two of the trial on Wednesday, 27th April. Prior to the evidence for the first named defendant commencing Mr. Keane SC on behalf of the first named defendant asked that the plaintiff would at that stage elect as to what remedy he was seeking. Following exchanges between both counsel and me, Mr. Whelan S.C. clarified that the plaintiff was seeking an order for specific performance; damages in addition to specific performance by reason of the delay in completion and in the event that the court refused specific performance damages in lieu of specific performance.
There were also exchanges as to the nature of the claim being made on behalf of the plaintiff for damages. As appears from p. 25 of my judgment of the 7th July I understood Mr. Whelan to indicate that the plaintiff was not making any claim for special damages both in relation to the claim for damages in addition to specific performance and in relation to the claim for damages in lieu of specific performance.
Mr. Whelan at the hearing subsequent to my judgment informed me that in giving that indication to the court he was only addressing the plaintiff's claim for damages in addition to specific performance.
At the end of these exchanges on day two of the hearing I made a ruling that I would not leave over further evidence in relation to damages as had been suggested at one point but rather would hear submissions at the end of the case in relation to the claim for damages on the basis of the evidence already given. Again, as is apparent from my judgment of 7th July, as I had understood the submissions made by Mr. Whelan to relate to all claims for damages I intended that ruling to relate to evidence in relation to all claims for damages. Notwithstanding when I commenced consideration of the quantum of an award for damages in lieu of specific performance I concluded in the light of the evidence given it was necessary to obtain certain further evidence of the amount of expenses which on the evidence given had probably been incurred by the plaintiff and the then circumstances of the deposit.
The additional evidence which I considered necessary at the time of my judgment of 7th July was in part based upon the indication which I had understood to be given by Mr. Whelan that no claim for special damages was being made. In relation to damages in lieu of specific performance, I understood this to mean that no claim was being made that the property the subject of the sale had increased in value between May 2003 and the date of the hearing. In my judgment of 7th July at p. 25 I expressly stated "no evidence was given of any difference in value of the site the subject of the sale between May, 2003 and the date of the hearing".
At the subsequent hearing Mr. Whelan informed me, he believed at all times during the hearing that in the event that the court were to refuse the claim for specific performance and determine that the plaintiff was entitled to damages in lieu of specific performance that the quantification of those damages and the evidence necessary to do this would be left over to a future date as was done in the case of O'Connor v. McCarthy [1982] I.R. 161. He submitted that such an approach is the norm and further pointed out that as the appropriate measure of damages for loss of bargain is the difference in the value of the premises at the date of the contract and the date of judgment that it is not possible to call evidence in relation to that value until after judgment is given.
It is common case that the court in determining the amount of an award of damages in lieu of specific performance will take into account inter alia the loss of bargain. As stated by Farrell on Specific Performance at page 21, par. 1.31 "The loss suffered by not getting the property agreed to be sold should be measured at the date of judgment which decides that the claimant should have the damages in lieu of specific performance. The loss under that head is the difference between the value of the property at the date of that judgment and the contract price". Where it is being contended on behalf of a plaintiff that there has been an increase in value of the property it would appear necessary to leave over evidence of the increase until after judgment on the claim for specific performance.
I have carefully reconsidered the transcript of the exchanges on the 27th April. Whilst, at that the time I understood Mr. Whelan's statement that there was no claim for special damages to relate to all claims for damages being made and my subsequent ruling undoubtedly was intended to relate to all such claims, I can understand in the light of the exchanges that there may have been some confusion as to which claim for damages was being addressed in particular when at p. 25 Mr. Whelan indicated that he was not making a claim for special damages. I also accept that (as does Mr. Keane on behalf of the fist named defendant) Mr. Whelan is totally bona fide in now submitting to the court that he understood at the time the exchanges only to relate to the claim for damages in addition to specific performance.
The question which arises therefore is whether in the light of this misunderstanding between me and counsel I have jurisdiction to alter the earlier ruling in relation to the admission of further evidence and if so whether I should exercise my discretion to allow a claim for a loss of bargain based upon a difference in value of the property between the date of contract and date of judgment to be pursued and evidence be given in relation to such difference in value.
Mr. Keane on behalf of the first named defendant objects to the admission of any evidence on behalf of the plaintiff of a difference in value of the property between the date of the contract and the date of judgment. He does so by reason of the ruling on the admission of evidence given in my judgment of 7th July at p. 26. That ruling must be considered in the context of what I have stated immediately preceding the ruling in relation to what had been indicated on behalf of the plaintiff in relation to the claim for special damages. Mr. Keane relies upon the decisions in relation to the circumstances in which according to common law principles a final order, made and perfected may be interfered with as set out in the judgment of Murray J. in the Supreme Court in McMullen v. Clancy (Unreported, 31st July, 2002). He does however accept that in this instance no order has been made up or perfected. Further he accepts that the outstanding issue between the plaintiff and the first named defendant is the quantum of the damages to which the plaintiff is now entitled as damages in lieu of specific performance.
I have concluded that the decisions of the Supreme Court in Belville Holdings v. Revenue Commissioners [1994] 1 ILRM 29, in Re Greendale Developments Limited (No 3) [2000] 2 I.R. 514 and McMullen v. Clancy (Unreported, Supreme Court, 31st July, 2002) do not deprive this court of jurisdiction to determine whether or not the ruling previously given as to the type of evidence I would admit prior to determining the quantum of the damages in lieu of specific performance to be awarded to the plaintiff should be altered for the following reasons.
Each of the above decisions concerns a factual situation where judgment had been given and an order made and drawn and perfected on the relevant substantive issue. On the facts of this case the substantive issue of the quantum of the damages in lieu of specific performance to be awarded to the plaintiff has not been determined. No order has been drawn pursuant to the judgment of 7th July, 2005. I have also considered the underlying public policy and common law principles in relation to finality of litigation referred to in those decisions. I have concluded that they do not deprive this Court of jurisdiction to alter, if it considers appropriate the procedural ruling on the admission of evidence contained in my judgment of 7th July 2005.
The obligation of this Court is to hear cases in accordance with the principles of constitutional justice, including those relating to fair procedures. I accept that a court should not lightly change a procedural ruling made in a case. However, for so long as the court retains seisin of the case and there are outstanding issues between the parties to be determined the court remains obliged to hear and determine those issues in accordance with the law and fair procedures. I have concluded that the principles relating to the measurement of damages in lieu of specific performance and fair procedures require me on the facts of this case to vary the rulings given so as to now permit the claim for loss of bargain be pursued and to admit additional evidence relating to the alleged difference in value of the property the subject matter of the sale between the date of contract and the date of judgment. I have done so for the following reasons.
I understood senior counsel on behalf of the plaintiff to state on the second day of the hearing that the plaintiff was not making any claims to special damages in relation to all the potential claims for damages. In particular I understood this to mean that in relation to the potential claim for damages in lieu of specific performance that no claim was being made for a difference in value in the property between the date of the Contract and the date of hearing and/or judgment. The rulings made both on day two of the hearing as to the timing of the admission of evidence in relation to the claim for damages and those in my judgment were based upon this understanding.
I now accept that Mr. Whelan SC did not intend to inform the court, by the statement made, that the plaintiff was not making any claim to a difference in value in the property between the date of contract and date of judgment. Further that he had at all material times instructions to make such a claim.
The first defendant is not at any procedural disadvantage by such evidence now being admitted. In the directions which I gave since this matter was raised on behalf of the plaintiff subsequent to my judgment of 7th July, 2005, I granted the first defendant sufficient time to consider the potential evidence of the valuer to be called on behalf of the plaintiff and to put in place appropriate evidence of valuation in response.
Quantum of Damages
It is common case that the plaintiff is entitled as part of the award for damages in lieu of specific performance to the return of the deposit paid of €52,000 and such interest as has been earned thereon. The deposit is retained by the solicitor for the first named defendant.
The only further claim made by the plaintiff is the claim for loss of bargain. It is accepted no claim for expenses lies where loss of bargain is pursued. The quantum of such claim is submitted to be €1,480,000 based upon a valuation of the property in question as of the 7th July, 2005, at €2,000,000.
The first defendant submits in response to this claim:
1. That the open market value of the property as of the 7th July, 2005, is €900,000; and
2. By reason of the delay of the plaintiff in prosecuting the proceedings that the loss of bargain should be assessed by reference to the market value of the property at an earlier date. It is submitted that July, 2004 is the appropriate date when proceedings ought to have been heard and determined and that at that such date the open market value of the property was €600,000.
3. That as damages in lieu of specific performance are discretionary that the court should take into account the attempts made by the first named defendant to complete the sale at a reduced price in the autumn of 2003 and the fact that the first defendant sold the property to the second defendant for €485,000 i.e. lower than the original contract price of €520,000 and as a result has not been enriched by the second transaction.
The first defendant relies upon the decision of the Court of Court Appeal in Malhotra v. Choudhury [1980] Ch 52 to support its submission that this court should determine the quantum of the loss of bargain by reference to a date earlier than the date of judgment. In that case the evidence was that the price of the property had continued to increase from the date of the contract to the date of the judgment. In his judgment, at page 81, Cumming-Bruce LJ stated
"… it is unfair to the defendant that the deliberation with which the plaintiff moved from the middle of 1975 until he issued the present proceedings in January 1977 should be allowed to enhance the damage which the defendant has to pay the plaintiff if the price level of real property has risen during that period. For my part I would think that justice is done between them by holding that the plaintiff did not sufficiently mitigate his damage by proceeding with greater celerity in the various and difficult legal convolutions that he has being forced to undergo. The right order is that, for purposes of valuation of Novar [the property in question] and the loss sustained by the plaintiff by the failure of the defendant to honour the contract for sale, the terminal date by reason of delay should be moved back from October 20, 1977, to October 21, 1976."
The Court of Appeal then directed that the assessment of damages was to be the difference between the value on 21st October, 1976, and 4th June, 1974.
On the facts of this case I have concluded that I should not make any adjustment of this nature for two reasons. I have concluded in my judgment of 7th, July, 2005, that it was following a letter sent by fax on 31st October, 2003, that the solicitor for the plaintiff accepted that the first named defendant was not prepared to continue further negotiations as to how the sale might be completed. The plenary summons was issued on the 25th November, 2003. On 8th December a letter was written to the solicitor for the first named defendant asking if they had authority to accept service of proceedings. In default of a response the proceedings were served directly on the first named defendant on 22nd December, 2003. An appearance was entered on 2nd January, 2004. The statement of claim was delivered on 18th February, 2004, and the defence of the first named defendant delivered on 4th May, 2004.
In the meantime in February, 2004 the plaintiff became aware of the sale to the second named defendants. Initially separate proceedings were commenced against the second named defendant and ultimately by an order of 2nd November, 2004, the second named defendant was added to these proceedings. An amended statement of claim was delivered on 4th November, 2004, a defence of the second named defendant delivered on 4th December, 2004, and notice of trial served on 24th February, 2005.
On these facts and in particular given the complexities introduced by the sale by the first named defendant to the second named defendant and intervening interlocutory relief applied for which is not referred to in the above list I have determined that there was no significant delay by or on behalf of the plaintiff in these proceedings. The only criticism which might be made of the plaintiff and his advisors relates to the very early period up to the date of delivery of the statement of claim. Even if it were to be considered that the plaintiff should have moved with greater alacrity during this period I have concluded that any delay was only of the order of approximately four to six weeks in total.
The evidence of the valuers for both the plaintiff and the defendant do not suggest any significant difference in the value of the property between May and July 2005. On the contrary the last comparative sale relied upon by the valuer for the plaintiff was the sale in May, 2005 of Auburn Hall in Edgesworthtown.
Accordingly I propose reaching a conclusion on the market value of the property the subject matter of these proceedings as of the date of judgment i.e. 7th July, 2005, upon the basis that such value has remained constant since May, 2005. I will now refer to this value as the "current market value".
I have also concluded that there is no basis upon which this court could now exercise a discretion to reduce the amount to which the plaintiff might otherwise be entitled by reason of the negotiations in the autumn of 2003. No authority has been advanced in support of the proposition and I am unable to identify any relevant principle which permits the court to make such a reduction.
There is significant difference between the view of Mr. Paul Murtagh, the valuer for the plaintiff and Mr. Patrick Davitt, the valuer for the first named defendant as to the current market value. Each are experienced valuers with a knowledge of the area and adjacent areas in Co. Westmeath and Co. Longford. Mr. Murtagh may have a more intimate knowledge of property in Edgeworthstown and was aware of two recent private sales in Edgeworthstown upon which he relied as comparators. The first of these was the private sale in 2004 of the Imperial Hotel which is a property of approximately 1.1 acres in the centre of Edgeworthstown. It traded as a licensed premises and restaurant and the building was stated to have been in poor structural condition at the time of the sale. It has a large car park. The sale price was €1,500,000 and Mr. Murtagh valued the seven day liquor licence at approximately €150,000.
The second sale referred to by Mr. Murtagh was the private sale in May 2005 of Auburn Hall for €300,000. This was stated to be a dilapidated building but possibly capable of use on approximately 0.25 acres. This is a little closer to the centre of Edgeworthstown than the mart site. It was stated that at auction this property was withdrawn at €260,000 and sold later for €300,000.
Mr. Murtagh's evidence was that if one applied the prices obtained for the Imperial (excluding the value attached to the licence) and Auburn Hall pro rata to the size of those sites to the mart premises of 2.05 acres that the appropriate valuations would be €2.4 million or €2.5 million. He accepted that he would not expect to obtain an increase in price pro rata to the increase in size but stated that by discounting back to €2 million he had made an appropriate adjustment. He emphasised that in terms of zoning and planning permission all three sites were identical. All were zoned for commercial purposes and none had planning permission for any particular development. He also stated that he believed that both the Imperial Hotel and Auburn Hall were bought for the purposes of redevelopment and it was not contemplated that the existing buildings would be used. The buildings of each were however capable of use at the dates of sale.
If the court were to accept Mr. Murtagh's valuation of €2 million as the current market value of the mart site this would mean an increase in value of approximately 280% from the contract price in May 2003. Such increase is over approximately two years. Mr. Murtagh could not identify any particular reason for such an increase. He did refer to tax incentives for the western region including Co. Longford. He pointed out that Edgesworthtown would be the first town going west at which these incentives would apply. Such incentives have been in existence since 1997/98. Mr. Murtagh's evidence was that Edgesworthtown was slow to respond and only did so in 2000 and 2001 and that the value of property had increased since then. He considered there had been a significant increase towards the end of 2004 by reason of a belief that planning permission had to be applied for any redevelopment before 1st January, 2005, if the incentives were to be availed off. On this evidence the price obtained for the mart in May, 2003 should have benefited to some extent from the increases caused by the tax incentives.
Mr. Davitt's evidence of €900,000 was not based upon any close comparators. He gave evidence of sales in a business park in Mullingar and a 3.3 acre site in Castlepollard. They are less significant comparators than those given by Mr. Murtagh. In relation to the sale of the Imperial Hotel he suggested that a price of €175,000 might have been attributed to the licence and that some value would have been attributed to the buildings such that it might be appropriate to attribute only €600,000 to €700,000 to the site alone.
The evidence in relation to the sale in 2003 of the mart site is that it was originally advertised through auctioneers, Brady McDonagh Casey and the second named defendant gave evidence of seeing a large "for sale" sign on it. Further that the asking price by the auctioneers was then €500,000. An oral agreement was reached between the auctioneers and the solicitor for the second named defendant in April, 2003 for the sale to him at €480,000. Subsequently this sale was not proceeded with and agreement was reached with the plaintiff for €520,000. The sale agreed with the plaintiff was without the benefit of auctioneers. There is, however, no suggestion that the price at which the property was sold to the plaintiff in May, 2003 was not the then market price.
In reaching my conclusion as to the current market price I do not propose taking into account the subsequent sale in November, 2003 to the second named defendant for €465,000. The evidence given by Mr. John Duffy on behalf of the first named defendant was that the first named defendant was then under pressure from its banks and a quick sale was needed. I do not consider that the market was tested at that time.
Whilst the evidence of Mr. Murtagh supports a significant increase in value I cannot accept it supports an increase in the order of 280%. I have concluded that the probable open market valuation of the mart site, the property the subject matter of the contract for sale in the period May to July, 2005 was in the order of €1,400,000. Accordingly I measure the damages for loss of bargain at €880,000.
The award of damages in lieu of specific performance will be for payment of the sum of €880,000 and an order for the return of the deposit paid of €52,000 plus the amount of the interest earned thereon as certified by the solicitor for the first named defendant.
Approved: Finlay Geoghegan J.