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Cite as: [2013] IEHC 372
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Judgment Title: Wallace -v- Rowley Neutral Citation: [2013] IEHC 372 High Court Record Number: 2009 510 COS Date of Delivery: 19/02/2013 Court: High Court Composition of Court: Judgment by: Feeney J. Status of Judgment: Approved |
Neutral Citation [2013] IEHC 372 THE HIGH COURT [2009 No. 510 COS] IN THE MATTER OF PROTIM ABRASIVES LIMITED (IN LIQUIDATION) AND IN THE MATTER OF THE COMPANIES ACTS 1963 – 2009 BETWEEN KIERAN WALLACE APPLICANT AND
PADRAIC ROWLEY RESPONDENT Judgment of Mr. Justice Kevin Feeney delivered 19th day of February, 2013. 1.1 The applicant is the official liquidator of Protim Abrasives Limited (“the Company”) having been appointed by order of this Court on the 12th November, 2009. The respondent is a businessman of Staffordstown, Dunboyne, County Meath. By notice of motion dated 26th March, 2012, the applicant sought directions from the Court pursuant to s. 231(3) of the Companies Act 1963. The liquidator sought directions from the Court in respect of three matters:
(b) if no such valid or binding contract of sale exists between the Company and Padraic Rowley regarding the property, whether Padraic Rowley has any lien, charge or other equitable or proprietary interest in a sum of €267,500 paid by him to Messrs. John B. O’Connor & Co., Solicitor, which monies are currently held in the latter’s client account; and (c) in the alternative to (b), whether Padraic Rowley is an unsecured creditor of the Company with regard to the sum of €267,500 so that the monies currently held in the client account of Messrs. John B. O’Connor & Co., Solicitor, should be paid by that firm to the official liquidator to be applied in the winding up of the Company.
1.3 All parties accept that no valid or binding agreement of sale exists between the Company and Padraic Rowley for the sale of the Company’s fee simple interest in lands situate at Tolka Industrial Park, Ballyboggan Road, Castleknock, Dublin together with the benefit of a right of way. It follows that the first matter in respect of which the direction of this Court is sought is accepted and acknowledged by the parties as a matter which should be determined on the basis that there was no valid or binding contract of sale and I do so. Another application for directions under s. 231(3) of the Companies Act 1963 relates to the issue as to whether the official liquidator of Protim Abrasives Limited (the Company) or Padraic Rowley is entitled to payment of the sum of €267,500 currently held in the client account of John B. O’Connor & Co., Solicitors, the Company’s former solicitors. The determination of that matter will decide whether Padraic Rowley is an unsecured creditor of the Company with regard to the sum of €267,500. It is accepted by the parties that if the Court concludes that Padraic Rowley is an unsecured creditor, that the monies currently held in the client account of Messrs. John B. O’Connor & Co., Solicitors, should be paid by that firm to the official liquidator to be applied in the winding up of the Company. 2.1 The central facts in this case are as follows. In 2008 Padraic Rowley was interested in purchasing the Company’s premises at Ballyboggan, Castleknock, County Dublin. Certain negotiations and discussions took place between the Company and Padraic Rowley and each of those parties was represented by their own solicitor with John B. O’Connor & Co. acting for the Company and Brendan Clarke & Co. acting for Padraic Rowley. During the course of the negotiations, John B. O’Connor & Co., acting on behalf of the Company, forwarded a draft contract for sale to Padraic Rowley’s solicitors, Brendan Clarke & Co. The covering letter accompanying that draft contract can no longer be located but the parties have proceeded on the basis and accepted that the draft contract was provided on the basis that it was subject to contract/contract denied. After receipt of the draft contract, Padraic Rowley’s solicitors replied by letter of 29th February, 2008 enclosing and returning the contract for sale. That contract for sale had been amended not only to alter the quantum of the purchase price but also by the addition of two hand-written special conditions set out at 5(xiii) and (xiv). The letter of the 29th February, 2008 enclosing the amended contract for sale was headed “Subject to contract/contract denied” and in the body of the letter it was stated:
Please note that no contract shall exist until both copies of the contract are signed by all parties, contracts exchanged and deposit paid in full.” 2.2 On the 27th May, 2008 a meeting took place between a representative of the Company and Padraic Rowley and following that meeting, Mr. Lynch of the Company executed the version of the contract for sale which had been returned with the letter of the 29th February, 2008. That executed contract for sale was sent, not to the purchaser’s solicitors, that is, the solicitors acting for Padraic Rowley or to Mr. Rowley in person, but to Lisney & Co., who were a firm of auctioneers acting for the Company in and about the negotiations for the proposed sale of the property. The executed contract which had been signed by Mr. Lynch, on behalf of the Company, was at no time forwarded, delivered or sent to either Padraic Rowley, the proposed purchaser, or to his solicitors. On the 4th June, 2008, Brendan Clarke & Co., the solicitors acting for Padraic Rowley, wrote to the solicitors for the Company, John B. O’Connor & Co., and stated:
3.1 Padraic Rowley, the respondent in this application, contends that the payment of the sum of €267,500 enclosed with the letter of 29th February, 2008 was the payment of a deposit which was subject to the conditions set out in the contract for sale which was enclosed with the letter. As part of his argument, it is claimed that such conditions resulted in John B. O’Connor & Co. holding the sum of money as a stakeholder. It is claimed that the monies were accepted and received in circumstances which resulted in John B. O’Connor & Co. having an obligation pursuant to condition 5(c) of the Law Society Contract General Conditions to hold the monies paid as a deposit by or on behalf of the purchaser. It is claimed that the monies were held by the recipient thereof as trustee for the purchaser. It is claimed on behalf of Padraic Rowley that condition 5(c) of the Law Society of Ireland General Conditions of Sale (2001 Ed.) applied and in effect it was agreed by the parties and therefor condition came to be binding on the parties. Such term, it is claimed, was contemplated by both the vendor and the purchaser and the deposit was paid and received on that basis. 3.2 On behalf of the liquidator it is claimed that the payment of the deposit of €267,500 was not subject to the conditions for sale, as claimed on behalf of Padraic Rowley, in that there was no contract for sale, either at the time that the payment was made or at any time thereafter. As part of that argument, the liquidator contends that the deposit sum paid by the purchaser during the course of the negotiations was paid to the Company’s solicitor and that in a case such as this which was a proposed sale by private treaty and where both parties were represented by separate solicitors, it follows that each solicitor is the agent of and has power to bind his or her respective client. It follows that any deposit payment received by a solicitor is, unless a contrary agreement is made, deemed to the property of the client of the solicitor to whom it is sent. It is also claimed on behalf of the liquidator that there was no agreement to the contrary and since the payment was made to the Company’s solicitor that that payment is the property of the Company. 4.1 The proposed sale in this case was by way of private treaty. It was not a sale by public auction where the payment of a deposit to an auctioneer is, unless a contrary agreement is made, deemed to be received by that auctioneer as stakeholder. That arises in circumstances where the auctioneer is recognised as simultaneously being the agent for both the vendor and purchaser. In this case, the deposit was paid to the solicitor who was acting for the Company, the proposed vendor of the property, and the sale was to be by private treaty. The deposit was not paid to the Company, that is to the vendor, personally and the issue which arises in this case is in what capacity John B. O’Connor & Co. received the deposit. 4.2 The capacity of a deposit holder is considered in the textbook “Irish Conveyancing Law” (Wylie and Woods) 3rd ed., at para. 10.25, page 292, where it states:
4.3 In cases where a sum of money is paid over by a proposed purchaser to his counterparty in the course of negotiations, the identity of the person to whom the monies are paid and the capacity in which that person acts are crucial to determining the basis upon which the sum of money or deposit is received. Where each party has a solicitor, that solicitor is agent of and has power to bind his or her respective client and any deposit or payment received by a solicitor is, unless there is either a contrary agreement or an express provision to the contrary, deemed to be the property of the solicitor’s client. 4.4 The distinction between a vendor’s solicitor being the agent of his client and being a stakeholder and the circumstances in which such distinction arises and the consequence arising therefrom was set out in Bamford v. Shuttleworth [1840] 11 AD & E 926. That was a case dealing with a sale of premises by auction where the memorandum of agreement to purchase and sell was signed by the auctioneer as agent for the purchaser and by the vendor’s attorney subscribing himself as “agent for the said SS,” the vendor. The purchaser in that case paid the deposit to the attorney who gave him a receipt signed by himself as “agent for SS”. After the sale fell through as a result of the vendor’s default and the deposit was not returned, proceedings were commenced and it was held “that the purchaser could not bring an action of money had and received against the attorney, for that he was not a stakeholder, but merely the vendor’s agent, and payment of the deposit to him was payment to the vendor”. 4.5 The principle of a vendor’s solicitor being the vendor’s agent and not a stakeholder as identified in the Bamford case was applied and followed in Ellis v. Goulton [1893] 1 QB 350. That case dealt with the sale of premises by auction where the purchaser paid a deposit to the vendor’s solicitor as agent for the vendor. After the sale fell through as a result of the default of the vendor, the purchaser brought an action to recover the deposit from the vendor’s solicitor and it was held that the payment of the deposit to the solicitor was equivalent to payment to the vendor and that the action against the solicitor could not be maintained. The decision in that case drew the distinction between a stakeholder and an agent for one of the parties; the former is the agent of both, but the latter is the agent of only one, and responsible only to that one. Bowen L.J. in his judgment held (at pp. 352 and 353):
4.6 It is clear from the judgment of Bowen L. J., and there is no issue raised on this point, that when a purchaser pays a deposit under a contract for sale, that person when making the payment may enter into an agreement with the vendor that the money shall be held by the party receiving the deposit as agent for both the vendor and the purchaser. It is in those circumstances that the person receiving the money becomes a stakeholder. If there is no such agreement, a payment by a proposed purchaser to the vendor’s solicitor is identified as being the same thing insofar as the person who pays it is concerned as if the payment had reached the hands of the principal. 4.7 The statement of Bowen L. J. in Ellis v. Goulton was considered and approved by the Court of Appeal in the case of Tudor v. Hamid & Ors. [1988] 1 EGLR 251. Slade J. in giving the judgment of the Court of Appeal dealt with the statement of the law made by Bowen L. J. in Ellis v. Goulton (and quoted above) in the following terms:
Accordingly, I accept the submission of Mr. Godfrey that the relevant rule is that, in the absence of an express or implied agreement to the contrary, money paid by a purchaser of land to the vendor’s solicitor is received by the solicitor as agent for the vendor, not as a stakeholder. It will therefore be necessary to look to see whether there was an express or implied agreement to the contrary in the present case.” 4.9 As stated in Irish Conveyancing Law (Wylie and Wood) (3rd ed.) (at para. 10.27, pages 293 and 294):
‘When the sale is by public auction, the stakeholder will be nominated by the vendor who drafts the conditions of sale and who is therefore liable for his default. Similarly if the sale is by private contract and if the stakeholder is nominated by the vendor, he is liable for his default:” 4.10 The position of an auctioneer differs from that of a solicitor in that in the absence of an agreement to the contrary, an auctioneer, in this country, receives a deposit as a stakeholder and not as an agent of the vendor. 4.11 The statement of the legal position in this jurisdiction as set out in Wylie and Woods and quoted above was considered by Barrington J. in Desmond v. Brophy [1985] I.R. 449 where he adopted with approval a similar statement of the law by Mr. Wylie from the first edition of his textbook Irish Conveyancing Law in the following terms (at p. 455):
‘If an estate agent, before any binding contract is made, asks for and receives a deposit, giving the receipt in his own name without more, the question arises: in what capacity does he receive it? As agent for the vendor? or as stakeholder? I cannot believe that he receives it as "agent for the vendor", for, if that were so, the estate agent would be bound to pay it over to the vendor forthwith, and the vendor alone would be answerable for its return. That cannot be right. Seeing that no contract has been made, the vendor is not entitled to a penny piece. If the estate agent should pay it over to the vendor, he does wrong; and if the vendor goes bankrupt, the estate agent is answerable for it.’ It seems to me doubtful if this kind of reasoning can be applied to the case of a solicitor. But, more important, I do not think that the present case can be resolved by such general considerations. I think the same applies to evidence which the court received concerning the practice of some solicitors who act for builders and whose practice, in the absence of clear instructions, is guided by admirable considerations of what they consider to be fair as between their builder clients and prospective purchasers in relation to the payment of booking deposits. In the present case Messrs. Barrett Apartments Limited had formulated a clear policy in relation to booking deposits and stage payments. These deposits and payments, whether received by the estate agent or the solicitor, were to go to the builder and the solicitor had no authority to accept these deposits except as agent for the builder. The fact that these deposits would go to the builder was explained by Mr. Lynch to Miss Boyle and Miss Desmond when they first showed interest in buying the flats.”
We have not been referred to any case in which a purchaser's lien was allowed to anyone who was not a purchaser, that is to say, anyone who had not entered into a contract to purchase. The suggestion is that the reason for such absence of authority is that a booking deposit is a device of recent origin which has not yet attracted a judicial decision as to its impact on the property being sold. I cannot agree. Payment by prospective purchasers to prospective vendors of money on a provisional, conditional, or otherwise returnable basis, prior to a formal contract, has always been taking place. In my opinion, the fact that such a payment has not been judicially recognised as creating a lien is simply because the payer has not the legal standing necessary to found a purchaser's lien.” 5.1 I am satisfied that a consideration of the facts in this case disclose that the deposit sum of €267,500 paid by Padraic Rowley to John B. O’Connor & Co. was not subject to any agreement express or implied or to any stipulation that John B. O’Connor & Co. as solicitors for the proposed vendor were to receive the monies as a stakeholder. The monies were paid during the course of ongoing negotiations between a proposed purchaser and a proposed vendor in circumstances where both of those parties were represented by their own solicitors. At no time was there an agreement reached between the parties and the full terms and provisions of any proposed purchase were never agreed. Padraic Rowley accepts and acknowledges within his own High Court proceedings that the sum of €267,500 was paid over at a time when he made a counter offer containing amended terms which he submitted to the proposed vendor and that such amended terms were never accepted and the counter offer was withdrawn by him before any agreement came into effect or could be concluded. 5.2 Two arguments are advanced to support a claim that the solicitors received the deposit as a stakeholder. It is claimed on Padraic Rowley’s behalf that it was in fact agreed that the solicitor would receive the deposit as a stakeholder. That contention is based on two separate grounds. First, it is claimed that the parties agreed that “the rubric adopted by them in the negotiation and possible completion of any contract, was under the Law Society’s General Conditions of Sale (2001 edition)” and that in making payment to the vendor’s solicitor, a purchaser was entitled to assume that the general conditions would apply unless these had been varied or excluded by agreement. The second ground is that it is claimed that the parties, that is the proposed purchaser and vendor, “contemplated no other terms of contract other than and except the Law Society’s General Conditions (2001) edition save and insofar as same were the subject of express amendment contemplated by the parties”. 6.1 To accept either of the arguments it would be necessary for me to decide either that there was a concluded agreement between Padraic Rowley and the Company providing that the deposit was paid under the Law Society’s General Conditions or for me to decide that the parties agreed to proceed on the basis that the Law Society’s General Conditions would apply, notwithstanding that there was no concluded agreement between the parties. I cannot accept either of those propositions. First, I am satisfied from my analysis of the case law that according to the general law the solicitors for the Company received the deposit as agent for their client, that is, for the proposed vendor and not as a stakeholder. Secondly, I am satisfied that the facts of this case establish that there was no agreement either express or implied nor was there any understanding that there was an agreement as to certain matters between the parties prior to there being a full completed agreement. In his own High Court proceedings Padraic Rowley contended that the negotiations between him and the Company were at all times subject to “a suspense of condition” under which it was agreed that no binding contract should exist until signed contracts were exchanged. No such binding contract ever came into existence and it follows that no agreement was ever reached between Padraic Rowley and the Company either in relation to the proposed purchase or in relation to the capacity under which the solicitor for the Company, the proposed vendor, received the deposit. Absent an agreement that the deposit was received by the vendor’s solicitor as a stakeholder, the solicitor received that sum as agent for his principal. The solicitors acting for the Company acted as solicitors for the vendor and there was no agreement that the deposit monies would be received as a stakeholder. 6.2 I am satisfied, on the evidence, that no agreement either express or implied was ever concluded as to the capacity in which the Company’s solicitor received the deposit and that the general position at common law applies. It follows that John B. O’Connor & Co. Ltd., as solicitors for the Company, received the sum of money on behalf of the Company. The money received by them is to be treated as if it had reached the hands of the solicitors’ principal, that is, the Company. It follows that the Company, through the official liquidator, is entitled to the transfer of the deposit monies into the liquidation account and to apply the money in the winding up. I therefore propose to answer the question set out at paragraph (b) of the notice of motion of the 26th March, 2012 by holding that since no valid or binding contract of sale exists between the Company and Padraic Rowley, and since the deposit monies paid by Padraic Rowley were paid, without any agreement to the contrary, to the solicitors for the Company and were therefore received by those solicitors for and on behalf of their client that Padraic Rowley has no lien, charge or other equitable or proprietary interest in the deposit sum of €267,500. It follows that Padraic Rowley is an unsecured creditor of the Company and that the monies currently held in the account of John B. O’Connor & Co. Solicitor, should be paid by that firm to the official liquidator to be applied in the winding up of the Company.
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