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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Marlan Homes Ltd -v- Walsh & Anor [2009] IEHC 576 (21 December 2009)
URL: http://www.bailii.org/ie/cases/IEHC/2009/H576.html
Cite as: [2009] IEHC 576
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Judgment Title: Marlan Homes Ltd -v- Walsh & Anor Composition of Court: Judgment by: Clarke J. Status of Judgment: Approved |
Neutral Citation Number: [2009] IEHC 576 THE HIGH COURT COMMERCIAL 2008 8311 P
MARLAN HOMES LIMITED PLAINTIFF AND
MARK WALSH AND GARY WEDICK DEFENDANTS
1.2 These proceedings have already been the subject of a decision of this Court in relation to aspects of the interpretation of the relevant agreement between the parties, see Marlan Ltd v. Walsh & Anor [2009] IEHC 135 (“the first judgment”). While the two key agreements governing the relations between the parties and, indeed, DCC are explored in some detail in the first judgment it is appropriate to revisit those agreements briefly. However, before so doing it is appropriate to turn to the issues which now arise.
a) Is Marlan entitled to specific performance of the November Agreement? b) Is Marlan entitled to damages or restitution for non-performance of the November Agreement? c) Did Marlan interpose itself into the negotiations with DCC to such an extent as to prejudice the obtaining of consent? d) Is Marlan disentitled to specific performance, damages or restitution by virtue of the direct contracts with DCC, as asserted by the defendants? e) Is Marlan guilty of contributory negligence by virtue of the direct contacts with DCC asserted by the defendants? 2.2 As can be seen, the first two issues concern the appropriate remedy to which Marlan might be entitled in the event that there has been a failure on the part of Mr. Walsh and Mr. Wedick to comply with their contractual obligations. However, the other three issues are concerned with the extent to which there has been a breach by Mr. Walsh and Mr. Wedick of those obligations. It is logical that those later issues should be considered first, for if there is no breach on the part of Mr. Walsh and Mr. Wedick of their legal obligations, then the question of remedy does not arise. 2.3 It is also necessary to note that, as the case developed at the hearing before me, it became clear that there were, in substance, two real sets of issues between the parties concerning the question as to whether there had been any breach by Mr. Walsh and Mr. Wedick of their obligations. The first set of questions concerned the precise obligations which Mr. Walsh and Mr. Wedick were under in relation to assistance in the provision of security in favour of a lender to Marlan over the DCC lands. That issue was a mixed question of the proper construction of the agreement between the parties but also was, at least on one view, potentially influenced by the facts concerning when and how request was made of Mr. Walsh and Mr. Wedick to provide such assistance in relation to security. The second set of issues which arose under that heading are those which are identified at subparas. (c) to (e) above. In substance, the suggestion made on behalf of Mr. Walsh and Mr. Wedick under those headings is that any failure to procure the provision of adequate security was caused or contributed to by actions taken on behalf of Marlan. It will be necessary to explore the facts which underlie both of those issues in due course. It should also be noted that the case as made by Marlan at the hearing before me concentrated on a claim for rescission on the basis that Mr. Walsh and Mr. Wedick could not, it was said, now comply with their obligations under the relevant agreement. In the event that Marlan succeeded, but that I was satisfied that damages rather than rescission was appropriate, it was agreed that any assessment of such damages be deferred. I first turn to the relevant agreements.
The November Agreement 3.1 On 23rd November, 2006, Marlan entered into a contract with Mr. Walsh and Mr. Wedick (the “November Agreement”) whereby Mr. Walsh and Mr. Wedick agreed, amongst other things, to provide access for the purposes of carrying out development work on three parcels of land, which are comprised in Dublin folios 929, 35060F and 4021. 3.2 The November Agreement also provided that construction in accordance with a planning permission, which had already been obtained and which is specified in the agreement, was to be carried out by Marlan. The agreement further provided that Mr. Walsh and Mr. Wedick would ultimately convey title to the lands either to Marlan or to such purchasers of the residential units intended to be constructed on the lands as might be nominated by Marlan. As pointed out in the first judgment, the advantage of structuring arrangements between parties in such a fashion is that there is a saving of stamp duty. In relation to the November Agreement, it would appear that Marlan was saving in excess of €400,000 in stamp duty. At all material times Mr. Walsh and Mr. Wedick were the registered owners of the land contained in folios 929 and 35060F (the “defendants’ lands”). No issue arises over those lands. The third folio, 40261, was owned by DCC (“the DCC lands”). The November Agreement granted Marlan an exclusive building license to enter on the defendants’ lands and the DCC lands (together the “subject lands”) for the purposes of carrying out the relevant development. The total consideration for the November Agreement was a sum of €4,925,000, which Marlan fully discharged. In practical commercial terms, even though not in legal form, the subject lands were sold to Marlan. It should also be noted that funding for the payment by Marlan was assisted by a loan in the amount of €3,859,000 from Mr. Sean Quinn, the father of the directors of Marlan. 3.3 The November Agreement provided that the subject lands were to be developed in accordance with a planning permission for the development of the lands issued on 14th September, 2005, on foot of an application for such permission submitted by Mr. Walsh and Mr. Wedick. The application for planning permission involved a proposed development comprising of 48 units and a car park, including an allocation of social and affordable housing. 3.4 At the time of the November Agreement, Mr. Walsh and Mr. Wedick had no actual interest in or binding agreement in respect of the DCC lands. However, Mr. Walsh and Mr. Wedick were at an advanced stage of finalising an agreement in respect of the DCC lands with DCC. The form of that agreement had been finalised. The November Agreement makes reference to the agreement between Mr. Walsh and Mr. Wedick, on the one hand, and DCC, on the other hand, even though, as events turned out, the November Agreement was executed at a time when the agreement between Mr. Walsh and Mr. Wedick, on the one hand, and DCC, on the other hand, was not yet in place. That later agreement was executed in December, 2006. The December Agreement 3.6 The December Agreement further provided that same would not be transferable save in the case of a financial institution which had entered into a mortgage with Mr. Walsh and Mr. Wedick, as proposed lessees, for the purpose of financing the development. The December Agreement required the completion by Mr. Walsh and Mr. Wedick of the development within a stated period, that is, within eight weeks of issue of a full grant of planning permission Mr. Walsh and Mr. Wedick would have the right to enter on the site and remain there for a period of 18 months for the purposes of constructing the development. 3.7 It is next necessary to turn to the question of interpretation already determined in the first judgment.
a) Whether Mr. Walsh and Mr. Wedick are required to compel DCC to consent to a mortgage in respect of the DCC lands? b) Whether Mr. Walsh and Mr. Wedick were required to execute a further limited recourse mortgage in respect of the defendants’ lands? 4.2 In the first judgment I held that Mr. Walsh and Mr. Wedick were required to procure the consent of DCC to a mortgage in respect of the interest of Mr. Walsh and Mr. Wedick in the DCC lands and that they were required to execute a further limited recourse mortgage notwithstanding the fact that Mr. Walsh and Mr. Wedick had already executed one such a mortgage in favour of AIB plc (“AIB”) in respect of the defendants’ lands. In reaching this conclusion I had particular regard to clause 6(c) of the November Agreement and Clause 14 of the December Agreement. 4.3 Clause 6(c ) of the November Agreement provided as follows:- “The licensor shall at the request of the licensee execute a Mortgage/Charge limited in recourse to the subject lands in a form which is acceptable to the licensor in favour of any bank or lending institution providing loan facilities to the licensee to enable the licensee to fund the works on the subject lands or any part thereof and the payment of the sums covenant to be paid by the licensee to the several parties under this agreement.” 4.4 Clause 6(c ) must be read in light of clause 14 of the December Agreement which stated as follows:- “The Agreement is an Agreement for Lease and shall not operate as a Lease and shall not be transferable save in the case of a Financial Institution which has entered into a Mortgage with the Proposed Lessee, details of which Mortgage will be provided to the Council in writing and must have been entered into specifically for the purposes of financing the Proposed Lessee to enable it to undertake the Approved Development on the Site the subject matter of this Agreement.” 4.5 In the first judgment, and for the reasons stated in it, I held that clause 6(c), read in light of clause 14, obliged Mr. Walsh and Mr. Wedick to enable their interest in DCC’s lands (being their entitlement to enter on the lands for building purposes and to receive a lease subject to the terms of that agreement) to be the subject of security in favour of Marlan’s lenders. As such clause 6(c) can only relate to a mortgage/charge over the interest that Mr. Walsh and Mr. Wedick enjoyed in DCC’s lands at the time of entering into the November Agreement (or, more accurately, were contemplated as being about to have once what became the December Agreement was executed). However, no such non recourse mortgage/charge in favour of a financial institution designed to allow Marlan to obtain the necessary finance in order to advance the development has, in fact, been entered into. 4.6 As set out above the November Agreement refers to three different properties, Mr. Walsh and Mr. Wedick being the owners of two properties and the third property being owned by DCC. In effect Marlan was granted a license to complete the development. In order to finance that development Marlan would require to borrow money and to that end would need to provide security. I have previously held, at para. 7.4 of the first judgment, that:- “the defendants are obliged to make available mortgage facilities in the ordinary sense over the lands in respect of which they are the registered freehold owners (presumably a registered charge if necessary), but are also obliged to enable their interest in the Dublin City Council lands (being their entitlement to receive a lease subject to the terms of that agreement) to be the subject of security in favour of Marlan’s lenders.” 4.7 In the light of that interpretation it is necessary to turn to the facts.
5.2 An application for a fire safety certificate had been lodged by John Hodgins, architect on 27th October, 2006. The fire department were dissatisfied with the plan drawings attached to the application and requested that the drawing be amended to meet their requirements. On 1st March 2007, Marlan’s amended application for a fire safety certificate was refused. Marlan suggested, correctly so far as it goes, that it was not possible to start development without the relevant Fire Safety Certificate. As a result of the initial refusal of the relevant certificate some minor alternation of the layout of the development was required. According to Marlan, difficulties in obtaining funding meant that a further application for the fire safety certificate was not lodged until August 2007. The Fire Officer’s approval was eventually received on 6th November 2007, which was in excess of eleven months from the execution of the November Agreement. 5.3 On 31st July, 2007, Marlan’s architect submitted a revised planning application to DCC in respect of the subject lands. That revised planning permission proposed changes to the external finishes to the apartment blocks. While Marlan had entered into some correspondence with DCC’s planning department concerning a more wide ranging revised application, same was never pursued. 5.4 In the meantime efforts to obtain finance for the development continued. Marlan applied to AIB for a facility in order to fund the payment of VAT on the November Agreement. To that end, in January, 2007, Mr. Walsh and Mr. Wedick, at the request of Marlan’s solicitors, executed a limited recourse mortgage in respect of the defendants’ lands in favour of AIB. However, as pointed out, the relevant facility was simply one sufficient to ensure the payment of VAT on the November Agreement. Difficulties emerged when Marlan sought further finance from AIB for the purposes of funding the development itself. Negotiations between the parties and AIB continued until July 2007. It proved impossible to agree terms sufficient to satisfy AIB as to the security being offered (AIB wanted an indemnity from Mr. Walsh and Mr. Wedick which they were unwilling give) and in the end, Marlan decided to look elsewhere. 5.5 In that context Marlan approached Bank of Scotland (Ireland) Limited (“BOSI”) in relation to funding. The requirements of BOSI included a non recourse guarantee from Mr. Walsh and Mr. Wedick and an indemnity in relation to the security for the proposed BOSI loan. The requirement of an indemnity again proved to be unacceptable to Mr. Walsh and Mr. Wedick. However, it was possible to negotiate a fresh loan approval from BOSI which issued on 22nd November, 2007, for the sum of €1,400,000. This loan was offered on the basis of Mr. Walsh and Mr. Wedick granting a third party non recourse mortgage as security. In a letter of 30th November, 2007, solicitors for Mr. Walsh and Mr. Wedick raised the question as to whether the relevant mortgage was to be granted over the defendants’ lands alone, or also over what was described as the lease of the DCC’s lands provided for in the December Agreement. On 11th December, 2007, an issue arose as to the interest that Mr. Walsh and Mr. Wedick had in DCC’s lands. 5.6 Marlan’s solicitors wrote to the solicitors for Mr. Walsh and Mr. Wedick on 7th December, 2007, notifying them of BOSI’s requirement for DCC to consent to the mortgage over DCC’s lands. This was the first time that Mr. Walsh and Mr. Wedick were called on by Marlan to obtain the consent of DCC. The form of consent to be signed was furnished to the solicitor for Mr. Walsh and Mr. Wedick on 20th December, 2007. On 11th December, 2007, the solicitors for Mr. Walsh and Mr. Wedick wrote to Marlan’s solicitors notifying them that their clients were only in a position to offer their interests under the December Agreement, being an agreement for a lease, and not their interest under a lease as it has not yet been granted. On 17th December 2007, Solicitors for BOSI notified the solicitors for Marlan that they would require the assignment of the December Agreement to Marlan and the consent of DCC to same. The solicitors for Mr. Walsh and Mr. Wedick were notified of this requirement on 18th December, 2007, by Marlan’s solicitors. On 2nd January, 2008, solicitors for Mr. Walsh and Mr. Wedick wrote to DCC’s solicitors seeking the required consent. 5.7 A letter from DCC’s solicitors dated 7th January, 2008, in response to the request for consent, indicated that they required a copy of the relevant Fire Safety Certificate and a commencement notice before obtaining DCC’s instructions in relation to the granting of the consent. A commencement notice had, in fact, been issued by Marlan in late 2007. 5.8 Along with the difficulties of obtaining consent from DCC was the increasingly precarious position of the status of the December Agreement because of the time limits of that agreement itself, which required, at condition 6 thereof, that the construction program be commenced within three months of the date of entry on the subject lands and that same had to complete within 18 months of the date of entry on the subject lands. Under condition 2 of the December Agreement, Mr. Walsh and Mr. Wedick had the right to enter onto the subject lands within 8 weeks of the issue of the full grant of planning permission. Planning permission had, of course, already issued on 14th September, 2005. The November Agreement describes the licence period as being the period of 18 months commencing on the date thereof, i.e. 23rd November 2006. This period then expired on 22nd May 2008. The November Agreement further provided at condition 7 (c) (ii) that Marlan, as the licensee, would adhere to the obligations of Mr. Walsh and Mr. Wedick, as set out in the December Agreement, including the constructions time frame as set out at condition 6 of the December Agreement. A letter was sent from the solicitors for Mr. Walsh and Mr. Wedick to Marlan’s solicitors on 6th February, 2008, which stated that Marlan was in danger of breaching the terms of the November Agreement by virtue of not having commenced the development at that point in time. 5.9 A letter of 13th February, 2008, from Marlan’s solicitors to solicitors for Mr. Walsh and Mr.Wedick sets out that Marlan delivered a commencement notice to DCC on 12th February, 2008. The inter party correspondence from this time period displays a level of desperation and frustration on the part of Marlan in obtaining the consent of DCC in order to facilitate funding for their development of the subject lands. On 9th July, 2008, Marlan’s solicitors again wrote to the solicitors for Mr. Walsh and Mr. Wedick stating that BOSI refused to sanction drawdown of the loan without the consent of DCC to the assignment of the December Agreement. 5.10 On 16th July, 2008, the solicitors for Mr. Walsh and Mr. Wedick wrote to DCC’s solicitors questioning the delay with the issuing of the consent. 5.11 It is clear that no such consent was, ultimately, forthcoming from DCC. It follows that the conditions which BOSI imposed in order that construction finance be provided were never complied with. It will be necessary to turn, in due course, to what flows from that fact. However, before leaving the facts it is also necessary to deal with contacts which occurred at two points in time, directly between Marlan or its representatives and DCC. It is contended on behalf of Mr. Walsh and Mr. Wedick that those contacts (or at least one of them) may have contributed to, or indeed caused, the difficulties which were encountered with DCC in obtaining the relevant consent. 5.12 Mr. Walsh and Mr. Wedick in particular object to the dealings between Mr. Sean Quinn and DCC, which they refer to as “inter-meddling”. Mr. Sean Quinn is the father of the directors of Marlan but is not an officer or member of Marlan. Mr Sean Quinn gave evidence that he was contacted by Mr.Wedick in July, 2007 requesting that he, in turn, contact DCC for the purposes of explaining to DCC the reason why work had not commenced. It is clear that, at that time, DCC were becoming concerned about the significant delay in commencing works. At the same time the difficulties in relation to the Fire Safety Certificate required to commence work had not been resolved. It is common case that Mr. Wedick contacted Mr. Sean Quinn. On Mr. Wedick’s case the purpose of his contact was to tell Mr. Quinn about the pressure being exerted by DCC arising out of the delay in commencement of the development works. Mr. Wedick denies that he asked Mr. Sean Quinn to contact DCC directly. That is an issue to which it will be necessary to return in due course. Mr. Sean Quinn further gave evidence that the DCC representative with whom he spoke stated that he would contact his principal to recommend that the December Agreement be rescinded. 5.13 In a letter of 20th July, 2007, DCC’s solicitors advised the solicitors for Mr. Walsh and Mr. Wedick that the December Agreement was not assignable and alleged that Mr. Walsh and Mr. Wedick were in breach of the December Agreement by not having commenced work on the development at that point. 5.14 From a letter of 23rd July, 2007, from DCC’s solicitors to the solicitors for Mr. Walsh and Mr. Wedick, it appears that DCC were under the impression the Marlan was intended to enter the subject lands merely as contractors. In a letter of 25th February, 2008, to the solicitors for Mr. Walsh and Mr. Wedick, Marlan’s solicitors set out that DCC did not recognise Marlan as a party in the transaction. Solicitors for Marlan directly emailed DCC on 5th March, 2008, in an effort, it seems, to ameliorate the impasse the parties had reached over the consent issue. 5.15 During this time, Marlan’s solicitors wrote a number of letters to DCC and DCC’s solicitors in relation to this issue. A letter from DCC’ solicitors to the solicitors for Mr. Walsh and Mr. Wedick of 18th July, 2008, sets out that DCC had knowledge, at that time, that Marlan were not merely contractors engaged by Mr. Walsh and Mr. Wedick to develop the subject lands. 5.16 In a subsequent letter of 6th August, 2008, to the solicitors for Mr. Walsh and Mr. Wedick, DCC’s solicitors set out that DCC was reluctant to permit an entity with which it had no contractual or other connection to enter onto its lands for a purpose over which DCC had no control. Against that factual background it is next appropriate to turn to the position of the parties. 5.17 Finally, it should be noted that, in October, 2007 Marlan had discussions concerning the possibility of granting a right of way over the defendants and the DCC lands to a another property development company, N1 Property Development Limited, to allow access to a building called Woodville House, located behind the DCC Lands. In that context the defendants’ lands and the DCC lands were also referred to in an application for planning permission by N1 Property Development Limited in relation to the renovation of the Northside Shopping Centre, North Dublin. This appears to have been arranged through Marlan’s solicitors at the time, Callan & Company and set out in a letter dated 4th October, 2007. The proposed right of way appears to have been subject to a contribution from N1 Property Development Limited for a roadway on the lands. According to Mr. Walsh and Mr. Wedcik, they were unaware of this agreement with N1 Property Development Limited and claim that it undermines the obligations of Marlan set out in the November Agreement.
6.2 Marlan submits that it is clear from the first judgment that Mr. Walsh and Mr. Wedick were obliged to obtain the consent of DCC to the creation of a security over the interest of Mr. Walsh and Mr. Wedick in the December Agreement. It is argued that it is clear that that consent was not forthcoming. Therefore, it is argued that Mr. Walsh and Mr. Wedick have failed to comply with their obligations under the November Agreement. In the light of the fact that development in accordance with the terms of either the November or the December Agreement is not longer, it is said, possible it is argued that the substance of the benefit to be obtained by Marlan under the November Agreement is no longer possible. In those circumstances it is said that Marlan is entitled to recission of the November Agreement. 6.3 Marlan rejects the claims of Mr. Walsh and Mr. Wedick that any intermeddling on their part substantially contributed to the defendants’ non performance of their obligations.
7.2 It is further asserted that there is no evidence that Marlan attempted to see if BOSI or other lenders would be prepared to proceed without the consent of DCC, in light of the fact that Mr. Walsh and Mr. Wedick were at all times ready, willing and able to execute a non recourse mortgage in respect of their interest in their lands. 7.3 It was submitted on behalf of Mr. Walsh and Mr. Wedick that the true reason why Marlan now seeks to rescind the November Agreement is that, because of the recent sharp downward movement of property values, Marlan does not wish to proceed with the development. 7.4 Mr. Walsh and Mr. Wedick assert that they have taken all appropriate steps to procure the completion of the mortgage as contemplated by clause 6(c) of the November Agreement. It is further argued that Marlan’s delay in seeking to proceed with the development disentitles Marlan to rescission of the November Agreement. 7.5 Against the background of that brief outline of the positions of the parties, it is next necessary to turn to the issues which arise in the proceedings. It seems to me that the issue which logically first arises if as to the obligations of Mr. Walsh and Mr. Wedick in respect of procuring that Marlan obtain an appropriate mortgage/charge over the interest of Mr. Walsh and Mr. Wedick in the December Agreement. I, therefore, turn to that issue.
8.2 I should first note that it does not seem to me that Mr. Walsh and Mr. Wedick were under any obligation to provide a guarantee or indemnity (even one which was limited in recourse) over any liabilities that Marlan might have to the lender in question. It is important to remember that the obligations of Mr. Walsh and Mr. Wedick are to be found in the November Agreement. What requirements, in addition to a mortgage/charge over their interest in the subject lands, that a lender to Marlan might require is not, in reality, any concern of Mr. Walsh and Mr. Wedick. It seems to me that the test is as to whether any requirement made of Mr. Walsh and Mr. Wedick was a requirement which was necessary in order that there be an effectual mortgage/charge over the subject lands. Any additional requirement which a lender to Marlan might have, other than one which was reasonably necessary to create such an effectual mortgage/charge, was something which needed to be resolved between Marlan and its lender rather than could give rise to any obligation on the part of Mr. Walsh and Mr. Wedick. I do not view an indemnity of the type that was under discussion, both in respect of AIB and BOSI, during the middle of 2007, as coming within the test of being a requirement reasonably necessary to give effect to a mortgage or charge of the type contemplated. 8.3 However, different considerations seem to me to apply to the request for the consent of DCC. It must be remembered that the reasoning behind the findings contained in the first judgment was that clause 6(c) refers to a mortgage/charge in relation to “the subject lands” which, it will be recalled, refers to all of the lands, and not just the defendant’s lands. It follows that clause 6(c) necessarily refers to some form of charge over or relating to the DCC lands. Until such time as the development had reached wall-plate level, it is clear that DCC were under no obligation to grant a lease to Mr. Walsh and Mr. Wedick or their nominees. It follows that there could not have been a legal mortgage relevant to that portion of the subject lands which was the DCC lands until such time as the development had reached wall-plate level. However, it is equally clear that clause 6(c) is intended to provide finance for the development itself (which would obviously include development up to wall-plate level). It follows that the form of charge contemplated by clause 6(c) was likely to be complied with, not in the form of a legal mortgage, but in the form of a charge over the interest of Mr. Walsh and Mr. Wedick in the December Agreement, for there is no other form of mortgage or charge over the DCC portion of the subject lands, that would have been available at any time while the development was being carried out. The finance for which the charge was to be security was, of course, required to carry out that development as a whole and not just development beyond wall plate level. 8.4 The question which, therefore, arises is as to whether the consent of DCC was reasonably necessary in order that such an effectual charge be put in place. 8.5 In order to approach that question, it is necessary to analyse what the entitlements of Mr. Walsh and Mr. Wedick under the December Agreement were. In substance those entitlements were twofold. Mr. Walsh and Mr. Wedick had an entitlement to go on to the lands in question for the purposes of carrying out the development. Secondly, Mr. Walsh and Mr. Wedick had an entitlement, provided the terms of the agreement were complied with, to procure that the 999 year lease contemplated by the agreement would be executed by DCC. In what way could it be said that a financial institution lending to Marlan would have security over the entitlements arising under that agreement. The only point of security from the perspective of a lender is that, in the event that there be a default on the loan concerned, the lender has a means of enforcing the relevant security. In substance, therefore, the lender would need to be in a position that, in the event that Marlan should default, it would be able to sell Marlan’s interest in the subject lands to a purchaser for the purposes of realising its security. In order that such a lender be in a position to sell Marlan’s interest, no difficulty arose in respect of the lands directly owned by Mr. Walsh and Mr. Wedick for those lands were the subject of a direct legal charge which would allow the lender, as the owner of the charge, to sell the lands concerned to a third party. However, the question needs to be asked as to how a lender could, in practice, sell Marlan’s interest in the remainder of the subject lands to a third party. 8.6 I should, in passing, note that I have used the term “interest” in respect of the DCC lands in a non-technical way. I am mindful of the fact that there are, as a matter of property law, questions which arise as to when a party may be said to have an “interest” properly so called in land. I have used the word “interest” in this judgment in a non-technical sense referring to whatever entitlements Mr. Walsh and Mr. Wedick or, indeed, Marlan might have had in respect of the DCC lands. 8.7 That being said, the question remains as to the position of a lender in the event that Marlan should default. If DCC had consented to any relevant arrangements, then it is clear that the position of any such lender would be secure in that it could enforce the security concerned and DCC, having so consented, would have to go along with the transfer of Marlan’s entitlements in respect of the December Agreement to any third party purchaser. However, in the absence of consent from DCC it seems to me that the position would have been entirely different. As pointed out earlier, the December Agreement gave two separate entitlements to Mr. Walsh and Mr. Wedick in relation to the DCC lands. First, they were entitled to go on to the lands for construction purposes. Second, they were entitled to require that the lease contemplated by the agreement be executed. How would a third party purchaser from a lender to Marlan stand in relation to those elements under the agreement? If such purchaser were to go into possession where would they stand viz-a-viz DCC? Secondly, if such purchaser constructed the development (at least to wall-plate level) where would they stand concerning an entitlement to obtain title to the lands concerned. As pointed out earlier, the December Agreement provided that same was not to be transferable except in the case of a financial institution entering into a mortgage with Mr. Walsh and Mr. Wedick. Two things seem to me to flow from that provision. The first is that Mr. Walsh and Mr. Wedick and DCC contemplated that there could be a transfer of the benefit of the agreement for the purposes of providing security to a lending institution which might lend to Mr. Walsh and Mr. Wedick. If it were considered possible for Mr. Walsh and Mr. Wedick to provide effective security to a lender without transferring, in some way, the benefit of the agreement to that lender, then the clause would have been unnecessary. Put another way, it seems clear from the clause in question that both DCC and Mr. Walsh and Mr. Wedick contemplated that the conferring of an interest by way of security on a lending institution would amount to a transfer of the benefit of the agreement and could, therefore, only be done within the parameters set out in that clause. What is said not to be capable of being transferred is the agreement which is described as an agreement for lease. Therefore, it follows that the creation of any charge over the agreement would have required the consent of DCC. 8.8 I am, therefore, satisfied that, at the level of principle, the consent of DCC was necessary in order that there be an effectual charge over the interests of Mr. Walsh and Mr. Wedick in the December Agreement in favour of any lender to Marlan. It follows that, at the level of principle, Mr. Walsh and Mr. Wedick had, in substance, agreed to procure that the consent of DCC be forthcoming. Without the consent of DCC, Mr. Walsh and Mr. Wedick could not give a limited recourse mortgage/charge over all of the subject lands (as required by the November Agreement) because without the consent of DCC it would not be possible to give an effective charge over their “interest” in that part of the subject lands which was the DCC lands. Finally it should be noted that, as the respective agreements both required construction to take place in accordance with the existing planning permission, it was necessary that any effective security covered all the subject lands. Security over the defendants’ lands only would not permit a lender (or a purchaser from a lender) to construct in accordance with that planning permission as part of the relevant construction was contemplated as being on the DCC lands which were an integral part of the site. It is next necessary to turn to the consequences of the finding that Mr. Walsh and Mr. Wedick were, in principle, required by the November Agreement to procure the consent of DCC to a charge over the interests which they held in the DCC lands by virtue of the December Agreement.
9.2 First, it seems clear that the precise focus on the consent of DCC to any necessary charge only arose in November, 2007, some twelve months after the November Agreement. It was, thus, quite late in the day before any request to obtain the consent of DCC was made to Mr. Walsh and Mr. Wedick. It will be recalled that both the November Agreement and the December Agreement contained reasonably tight timelines within which the development was to be carried out. It also seems clear, therefore, that Mr. Walsh and Mr. Wedick could not be said to have been in breach of any of their contractual obligations until such time as they had been requested to procure the consent of DCC and a reasonable time for the obtaining of such consent had elapsed. Up to that point, no request had been made of Mr. Walsh and Mr. Wedick which they were legally required to comply with, but which they were unwilling or unable to execute. The first question is, therefore, as to whether the undoubted fact that any failure to comply with a legal obligation on the part of Mr. Walsh and Mr. Wedick occurred at least a year after the November Agreement was put in place, affects the legal situation as things now stand. 9.3 Second, there is the question of what is said to have been inter-meddling on the part of those on the Marlan side with DCC. It is to that second question that I now turn.
10.2 However, I am not satisfied that there was anything untoward or improper in Mr. Quinn initiating such contact. In the immediate run up to the closing of the November Agreement, correspondence was sent by solicitors for Mr. Walsh and Mr. Wedick on 22nd November, 2008 to solicitors for Marlan indicating that they had requested confirmation from DCC that DCC were aware of the proposed licence to Marlon under the November Agreement. While a confirmation from DCC of that fact was included as one of the initial closing requirements of Marlan, it would appear on the evidence that that matter was not pursued on closing. However, the fact remains that it was entirely reasonable, in the light of the correspondence which had been received from the solicitors for Mr. Walsh and Mr. Wedick, for Marlan to believe that DCC were fully aware of the interest in the property obtained by Marlan on foot of the November Agreement. In those circumstances, it was entirely reasonable for Mr. Sean Quinn to be believe that Marlan’s involvement would come as no surprise to DCC. 10.3 In addition there is no evidence as to whether the contact which Mr. Sean Quinn made with DCC had any real effect on DCC’s considerations. Mr. Walsh and Mr. Wedick did not call any witness from DCC to establish an actual affect of Mr. Quinn’s contact. However, even if it had been the case that Mr. Quinn’s contact did, in fact, have an affect on DCC, it seems almost certain that any such affect would have stemmed from the fact that Marlan’s involvement would have come as news to DCC in the middle of 2007. However, Mr. Sean Quinn could not reasonably be expected to have believed, in advance of his contact with DCC, that the involvement of Marlan would come as news to them. 10.4 In all the circumstances, I am not satisfied that any contact made by Marlan with DCC can be said to have had any affect on DCC, and even it could be said that any such effect occurred, I am not satisfied that, having regard to the fact it was reasonable for Marlan to believe that DCC already knew of the details of their involvement, any such contact could have been expected, from Marlan’s perspective, to have such an affect. In the circumstances it does not seem to me that any of the contact made by Marlan with DCC can have any affect on the legal rights and entitlements of the parties. In similar vein I am not satisfied that the minor planning variation sought or the discussions entered into about a more significant variation did, in fact, effect DCC’s view. 10.5 I should, before leaving this issue, also comment that it seems (on the correspondence between the parties and DCC taken as whole) to be clearly the case that Mr. Walsh and Mr. Wedick (or their advisers) were highly reluctant to disclose to DCC the fact that Mr. Walsh and Mr. Wedick had, in substance, if not in form, sold the benefit of their interest under the December Agreement to Marlan. That Mr. Walsh and Mr. Wedick had, in fact, sold the substance of the benefit of the agreement is clear. The agreement provided for the right and obligation to go onto the property to construct (which right and obligation was, in effect, to now be passed to Marlan) and the right to receive title to the property in due course (which entitlement again had passed to Marlan). Whatever may be niceties of whether one could say that the legal interest in the December Agreement had been sold to Marlan, there can be little doubt but that the commercial substance in the December Agreement had passed to Marlan on foot of the November Agreement. In seems clear to me that Mr. Walsh and Mr. Wedick and their advisers did not want DCC to know of this fact and it seems further that the relevant correspondence bears no other construction. If, therefore, problems arose in respect of obtaining the consent of DCC, which stemmed from the discovery by DCC of the true extent of Marlan’s interest in the property, then those difficulties can only be placed at the door of Mr. Walsh and Mr. Wedick for being so coy with DCC about the true nature of the agreement entered into between them and Marlan. For those reasons it does not seem to me that the contact between Marlan and DCC can have any affect on the interests of the parties. The only remaining question is as to whether the undoubted delay in first requiring the consent of DCC (to which I have already referred) can affect the rights and entitlements of the parties. 10.6 In that context it must be remembered that DCC had not purported to bring the December Agreement to an end by the time that a demand for DCC’s consent emerged in November, 2007. While it would neither be possible nor appropriate for me, in these proceedings to which DCC are not a party, to make any definitive ruling on the rights and entitlements of DCC, it seems to me to follow that it was most unlikely that DCC could have brought the December Agreement to an end at that time without giving Mr. Walsh and Mr. Wedick a reasonable opportunity to complete. It would, undoubtedly, have been more than open to DCC to require a commencement of the works within a very short period of time, for commencement was already long overdue. However, it seems unlikely that DCC could have relied on the fact that commencement did not take place on time, as a ground for terminating the agreement, for DCC did not terminate the agreement as soon as they became aware that commencement in accordance with the terms of the December Agreement had not, in fact, occurred. 10.7 In the circumstances it seems unlikely that DCC could have done more, as of November, 2007 or thereabouts, than demand an immediate commencement and completion within a reasonable period of time. It seems likely that DCC would have been estopped from demanding any other action by reason of their failure to exercise any entitlement which they might otherwise have had to terminate the December Agreement at an earlier stage. In those circumstances, it does not seem to me that the contractual arrangements between the parties could, in any real sense, be said to have been significantly altered by reason of the delay to November, 2007. The arrangements were still capable of operation provided that the necessary security was put in place to afford Marlan the opportunity to raise finance for construction. 10.8 It follows that I am satisfied that Marlan could and would have commenced construction in the early part of 2008, had it been afforded the consent of DCC so as to enable it to satisfy the reasonable requirements of BOSI and thus obtain finance. It follows that I am satisfied that the only reason why the contract did not go ahead at that time was the failure on the part of Mr. Walsh and Mr. Wedick to procure the consent of DCC. It follows that Mr. Walsh and Mr. Wedick are in breach of contract by reason of failing to procure the consent of DCC, and the only issue which now arises is as to what consequences flow form that finding. It will be recalled that the primary relief sought on behalf of Marlan is rescission. In that context it is, therefore, necessary to turn to the law in relation to rescission.
11.2 However, it is also clear from Charlton that rescission will only be granted where a true restoration to the original position can be attained or can be attained to such an extent that no injustice will be suffered. The purpose of this rule is to protect a defendant from being put in an unjustifiably worse position than he occupied before the contract was made. However, deterioration of the subject-matter does not destroy the right to rescind nor prevent true restoration to the original position. Being an equitable remedy, a court has full power to make all just allowances although it may not be able to restore the parties precisely to the state in which they were before they entered into the contract. 11.3 On the subject of whether restitution is possible, counsel for Marlan pointed to the judgment of Griffin J. in Northern Bank Finance Corporation Limited where, at p. 208 he states:- “Both parties to a transaction can "as nearly as may be" be put back to the position they occupied before the transaction was entered into, even though the property which was the subject matter of the contract may have deteriorated in value in the meantime. For example, in Armstrong v. Jackson 37 [1917] 2 K.B. 822, a contract for the sale of shares by the defendant, a stockbroker, to the plaintiff was induced by the fraudulent misrepresentation of the defendant, who represented that he was purchasing shares for the plaintiff on the market whereas he was selling his own shares. The contract was rescinded although the shares had fallen considerably on the stock exchange in the meantime. The shares were the same shares and the defendant was getting back the shares he would have had if he had not sold them fraudulently to the plaintiff.” 11.4 As such, Marlan argues that whether or not the November Agreement was a wasting asset is immaterial to Marlan’s entitlement to rescission. 11.5 Mr. Walsh and Mr. Wedick argue that delay on the part of Marlan disentitled it to the remedy of rescission. Counsel for the defendants referred to the following passage from O’Sullivan, The Law of Rescission, at p. 422:- “The organising principle is that the defendant should not as a result of rescission be placed in an unjustifiably worse position than the position he would have occupied had the contract never been made. Where the claimant delays in electing to rescind, it will necessarily be difficult to justify any substantial prejudice the defendants might upon rescission suffer by reason of a change of circumstances occurring during the period of that delay. This is particularly so where the change in circumstance was foreseeable as for example in the case of a perishable asset of an asset liable to fluctuate in value.” 11.6 Speaking of the effect of delay in Erlanger v. The New Sombrero Phosphate Company (1878) 3 App Cas 1218, at p.1279, Lord Blackburn stated that:- “It must always be a question of more or less, depending on the degree of diligence which might reasonably be required, and the degree of change, which has occurred, whether the balance of justice or injustice is in favour of granting the remedy or withholding it.” 11.7 It should also be noted that, in this jurisdiction, partial rescission is not permissible: see Northern Bank Finance Corporation Limited. 11.8 Against the background of that analysis of the relevant legal principles I now turn to their application to the facts of this case.
12.2 So far as the first question is concerned it seems to me that Marlan has met the required test. It was a fundamental term of the November Agreement that Marlan would be able to obtain effective security over all of the subject lands to enable it to raise finance for the purposes of carrying out the development which was at the heart of the contract between the parties. Any breach of contract on the part of Mr. Walsh and Mr. Wedick which prevented Marlan from being able to give effective security (in accordance with what had been agreed in the November Agreement) to a lender, must, necessarily, amount to a fundamental breach because it goes to the very heart and root of the contractual arrangements between the parties. Without finance Marlan could not comply with the other terms of the contract. To require Marlan to be content with damages for breach of contract in circumstances where it was deprived of the means (i.e. finance) of complying with the principal object of the contract would, in my view, be inequitable. It follows, therefore, that Marlan are prima facie entitled to rescission of the contract. 12.3 The second question which arises is as to whether there are any circumstances that ought to prevent, on the facts of this case, Marlan from being entitled to rescission. Two possible issues arise. The first concerns the question of whether it is now feasible to restore the parties to the position in which they were prior to the contract. The second, and at least to some extent connected, question concerns delay. 12.4 With the exception of the issues which arise under the delay heading it seems to me to be clear that the parties can be restored to the position which they were in prior to the contract being entered into. On that basis Mr. Walsh and Mr. Wedick get their property back and Marlan gets its money back. The fact that the property may be less valuable than it was at the time of the contract is not, as Griffin J. pointed out in Northern Bank Finance Corporation Ltd., a bar to rescission. Neither am I satisfied that any action has been taken in relation to the possible right of way in favour of NI Property Development Ltd which could affect the title of Mr. Walsh and Mr. Wedick. That leads, therefore, to the question of delay. 12.5 Delay arises in two ways. First it is often said that delay defeats equity. A party who delays in exercising a claim to an equitable remedy may, thereby, lose that remedy. In that context it is necessary to analyse when the entitlement to equity first arose so as to determine the extent of any relevant delay and the consequences of it. Clearly Marlan had no entitlement to rescission until such time as there was a breach of contract. As pointed out earlier Mr. Walsh and Mr. Wedick could not be said to have been in breach of contract until a requirement for DCC’s consent became clear. Up to that point Mr. Walsh and Mr. Wedick had not failed to do anything that they were contractually obliged to do and which they had been asked to do. Obviously some reasonable period for obtaining the consent of DCC would also have to have been allowed. In those circumstances it does not seem to me that it could be said that any breach of contract on the part of Mr. Walsh and Mr. Wedick, such as might, prima facie, have entitled Marlan to rescission, could have arisen much before February, 2008. Any delay in maintaining these proceedings needs to be viewed from that time onwards. The proceedings were, in fact, commenced on the 9th October 2008. Regard must also be had to the fact that, during the relevant period (that is the period between a cause of action arising and the commencement of the relevant proceedings) much of the time was spent in ascertaining whether the problem could be solved by obtaining the consent of DCC. In the light of all the circumstances I am not satisfied that Marlan was guilty of any delay from the time when its entitlement to rescission would first have arisen to the commencement of proceedings seeking rescission such as would disqualify it from an order of rescission to which it would otherwise have been entitled. That leads to the final point which concerns the effect of delay on the December Agreement. 12.6 One way, on the particular facts of this case, in which it might not be possible to restore the parties to their original positions would be if the December Agreement were, in effect, no longer in being or had otherwise been significantly affected so that Mr. Walsh and Mr. Wedick could not now get back their previous interest in the DCC lands. At the time when the November agreement was entered into it was, of course, the case that Mr. Walsh and Mr. Wedick owned their own lands and had (or were about to have) the benefit of an “interest” in the DCC lands under the then contemplated December Agreement. The precise status of the December Agreement now is unclear. If rescission is ordered then Mr. Walsh and Mr. Wedick will, of course, retain the benefit of the December Agreement without any of the obligations in respect of the DCC lands that were passed to Marlan under the November Agreement. The question is, however, as to whether any delay which has occurred may now, in practice, prevent the December Agreement from having any legal effect, or give rise to a significantly altered effect, such that Mr. Walsh and Mr. Wedick would now be in a position that they would not get back, in practice, the benefit of that agreement. 12.7 In this regard it seems to me that the delay between November 2006 and November 2007 must, in the main, be placed at Marlan’s door. No valid reason for Marlan not going into occupation and commencing development was, in my view, tendered at the hearing before me. The obtaining of the fire safety certificate was a matter entirely for Marlan. Any failure on the part of Marlan to raise finance prior to the latter part of 2007 could not be blamed on Mr. Walsh and Mr. Wedick for Mr. Walsh and Mr. Wedick had not, during that period, failed to do anything which they were legally obliged to do. In those circumstances it seems clear that any consequences flowing from a delay up to the latter part of 2007 must be visited on Marlan. The difficulty with which I am faced is that DCC are not parties to these proceedings. Nor has any party chosen to put before the Court any evidence of the current position of DCC. I do not know whether DCC regard the December Agreement as still subsisting. I cannot make any determination in these proceedings which has the effect of binding DCC for they are not party to these proceedings. I have already suggested that DCC might have had considerable difficulty in treating the December Agreement as at an end as of the latter part of 2007 or the earlier part of 2008 by virtue of the fact that DCC had not acted to terminate the agreement when construction work did not commence within the timeframe specified in the December Agreement. Against that background and in the absence of any evidence as to DCC’s current view as to the subsistence or otherwise of the December Agreement, it does not seem to me that it would be proper for me to conclude that there would be a problem in putting Mr. Walsh and Mr. Wedick back into the position in which they were vis-à-vis the November agreement by an order of rescission. 12.8 In those circumstances and while in no way exonerating Marlan for any blame attaching to the delay which occurred between the early part of 2007 and the end of that year, it does not seem to me that it has been established that any such delay has, in fact, prevented restitutio ad integrum. The onus, in my view, was on Mr. Walsh and Mr. Wedick to establish that fact if reliance was to be placed on it. It would be pure speculation on my part to predict the attitude which DCC might take still less what view a court might take should DCC suggest that the December Agreement is now at an end. 12.9 In all the circumstances I am not, therefore, satisfied that there is any barrier to rescission.
13.2 Again for the reasons which I have sought to analyse I am not persuaded that there is any basis on which Marlan can properly be said to be disentitled to rescission whether on the grounds of delay or the absence of an ability to restore the parties to their pre-contractual position. 13.3 In the circumstances I propose declaring that the November Agreement be rescinded and directing that Mr. Walsh and Mr. Wedick repay the monies paid to them on foot of that agreement. I will hear counsel further on the precise form of the order which should be made.
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