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Cite as: [2015] IEHC 482
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Neutral Citation [2015] IEHC 482 THE HIGH COURT COMMERCIAL [2014 No. 4010P] BETWEEN JOHN REYNOLDS PLAINTIFF AND
ALTOMORAVIA HOLDINGS LIMITED, THOMAS ANDERSON, COLIN DOLAN, IAN REDMOND AND MICHAEL ORMOND DEFENDANTS JUDGMENT of Mr. Justice Cregan delivered on the 30th day of June, 2015 PART ONE - THE FACTS Introduction 2. Subsequently however further difficulties arose between the parties and the agreement was not executed on the 26th March, 2014. The plaintiff maintains that he was at all times anxious to enter into the lease with the defendants but the defendants persistently delayed matters to extract further concessions from him. Moreover the plaintiff was of the view that the defendants were not ready, willing and able to execute the lease, sign the guarantees and provide the funds. As a result therefore, he instituted these proceedings seeking specific performance of the agreement of 5th March, 2014 or in the alternative seeking rescission of the settlement agreement entered into between the parties and seeking damages for breach of contract. Subsequently he elected to sue only for rescission and damages. The defendants have resisted this claim and have counterclaimed also seeking specific performance of the agreement and the court order of 5th March, 2014. It is therefore an unusual case in that at various stages in these proceedings both parties have claimed specific performance of the agreement of 5th March, 2014. Background to these proceedings 4. Mr. Reynolds then received an approach to indicate to him that Altomoravia Holdings Ltd (“Altomoravia”) and the other defendants might be interested in taking a lease of his premises. Mr. Reynolds informed AIB of this approach and AIB was keen that Mr. Reynolds would enter into a lease with these persons because this would ensure that proper repayments would be made on the loan. The plaintiff therefore entered into the agreement for lease with the defendants as this would be a reasonable deal for him, would reduce his financial difficulties with AIB as long as the lease lasted and would, as he put it, “get AIB off my back”. Thus the parties entered into the agreement for lease on 12th April, 2012. 5. Mr. Reynolds’ evidence was that he then did whatever he could to assist the defendants in ensuring that the premises could be handed over to them in an appropriate manner. However it was at this time that various difficulties began to emerge. The sky walk and fire exit 7. However it soon became clear that Clancourt Properties/Mr. Kenny were not prepared to continue this arrangement with the new lessees. This had significant implications for the lessees because one of the fire exits was now closed off to them and therefore they had to create another fire exit to comply with fire safety regulations. 8. What happened next was that the defendants submitted a planning application to Dublin City Council without the knowledge or consent of Mr. Reynolds. When Mr. Reynolds learned of their plans - and indeed saw their plans - he was very taken aback as the plan, in his view, proposed serious alterations to the fabric of the building. They appeared to envisage a staircase running down through a part of the building into the vaults (and various ancillary alterations). Apart from the fact that Mr. Reynolds was concerned that such an alteration might not obtain planning permission because it would, or might, interfere with the structural integrity of the vaults, he was also concerned that the proposed plans would reduce the value of the premises as a whole. This was a major concern to him as he was the freehold owner of the premises and had a loan of €10 million secured on the premises to AIB. He was also concerned because if the defendants’ business venture in the Pod was not successful and if they surrendered the lease back to him, he would be left with a building which had significantly diminished in value. As a result, Mr. Reynolds repeatedly asked for copies of these plans from the defendants but they were never furnished to him. Eventually Mr. Reynolds decided to lodge an objection with the planning authority in respect of this application. However the defendants either obtained planning permission or obtained a certificate that the building was exempt from such requirements. Mr. Reynolds appealed this decision to An Bord Pleanala. That appeal was still before An Bord Pleanala when the first set of proceedings came on before the High Court. The court order/settlement of 5th March, 2014
(1) The defendant [John Reynolds] consents to an order of specific performance of the agreement for lease with a guarantee (“the agreement”) by 26th March, 2014 and specifically agrees to formally execute in the terms of the draft lease of the demised premises by 26th March, 2014. (2) The defendant agrees to withdraw all objections to the plaintiffs existing planning applications and his appeal (if any) against the issuing of a fire safety certificate will be withdrawn. (3) The defendant undertakes to co-operate with the plaintiffs with regard to future applications (if any) in respect of the premises. (4) The defendant confirms that the plaintiffs have no responsibilities to the Kennys/Clancourt/Shoalwater or any related party under the agreement other than the obligations stipulated under the lease and existing easements, rights of way and charges to include service charges. (5) The defendant indemnifies the plaintiffs in relation to all rates and charges including rates, water charges, ESB etc. attaching to or relating to the premises prior to the execution of the lease. (6) The defendant confirms the agreed rent free period of eighteen and a half months from the date of execution of the lease. (7) The defendant also confirms that there is a current policy of insurance in place in respect of the premises and will remain in place up to the date of the execution of the lease. (8) The plaintiffs agree to pay the sum of €185,000 upon execution of the lease by the defendant the payment of which constitutes a full discharge by the plaintiffs of their obligation to complete the transaction provided for in the agreement which sum does not include the sum of €75,000 already paid to Larry Conway. (9) The defendant agrees to pay to the plaintiffs the legal costs of the proceedings to include all reserved costs and costs of discovery costs in the cause in the event that same cannot be agreed the same shall be taxed. (10) This agreement shall remain confidential between the parties and their respective legal advisers and its terms shall not be disclosed save in accordance with law.” 11. It is clear, under the terms of the court order/agreement, that Mr. Reynolds also agreed to withdraw all his objections to the plaintiff’s existing planning applications and his appeal to An Bord Pleanala. Whilst no date was put on this in the court order, the evidence from the defendants was that they could not close if that planning appeal of Mr. Reynolds had not been withdrawn as it could undermine the entire deal. I accept this evidence. It is, therefore, in my view, implicit in the agreement/order that Mr. Reynolds had to withdraw the planning application by 26th March, 2014. 12. I turn now to review the chronology of events to see what in fact happened in relation to this matter. The chronology of events and the inter parties correspondence 14. One of the conditions of the agreement was that Mr. Reynolds had to withdraw his planning objection to An Bord Pleanala. 15. Mr Reynolds' evidence is that he told his planning consultant, Mr. Simon Clear, on the 6th March, 2014 (i.e. the very next day after the settlement of the first proceedings) that the proceedings had been settled and to withdraw the appeal. For some reason however Mr. Clear only wrote to An Bord Pleanala withdrawing the appeal on 25th March, 2014. 16. Simon Clear also gave evidence on behalf of the plaintiff. He corroborated in every respect Mr. Reynolds’ account of events. His evidence was that he spoke to Mr. Reynolds the day after the case settled, that Mr. Reynolds instructed him to withdraw the appeal from An Bord Pleanala and that he did so on the 25th March, 2014. Given that the case settled on the 5th of March and the appeal was not withdrawn until the 25th of March, he was asked in cross examination why he delayed so long in withdrawing the appeal. His answer was that he did not think it was urgent, and that he was busy at the time. It was only when he received a reminder email from Mr. Reynolds that he immediately instructed one of his colleagues in his office to contact An Bord Pleanala and to withdraw the appeal. This was done by email on 25th March, 2014. Moreover An Bord Pleanala acknowledged on its website that the appeal was withdrawn on 25th March, 2014. 17. It subsequently emerged that one of the defendants contacted An Bord Pleanala on or about the 28th of March, 2014 to ascertain whether the appeal had been withdrawn. They were told over the telephone that the appeal had not been withdrawn. However Mr. Clear, (who said that he worked with An Bord Pleanala for ten years,) gave evidence that sometimes persons responding to queries over the telephone did not have all the relevant information. It appears therefore that the combination of Mr. Clear delaying until the 26th March to withdraw the appeal, and the fact that one of the defendants contacted An Bord Pleanala on 28th March, 2014 and was given incorrect information, meant that the defendants drew the wrong conclusion - namely that Mr. Reynolds had not withdrawn the appeal. This was an incorrect conclusion on their part. Mr. Reynolds had in fact withdrawn the appeal before he was due to close the transaction on 26th March, 2014. 18. In the meantime, on 6th March, 2014, Mr. Carty sent an email to John O’Connor to stress the urgency of the withdrawal of the planning appeal by Mr. Reynolds. A reminder email was sent on 7th March, 2014. On 10th March, 2014, Mr. O’Connor replied saying Mr. Reynolds had issued the instruction some days earlier. On 25th March, 2014, Mr. Clear wrote to An Bord Pleanála withdrawing the appeal. An Bord Pleanála acknowledged this by letter dated 2nd April, 2014. 19. What is curious however, is that neither Mr. O’Connor, the plaintiff’s solicitor nor Mr. Carty the defendants’ solicitor appear to have done anything else between 5th March and 26th March 2014. One would have thought that experienced solicitors who had gone through the ordeal of litigation in respect of this transaction would have been in constant communication between the 5th and the 26th of March to ensure that all matters were proceeding satisfactorily so that no last minutes problems could emerge. In any event that did not happen. 20. Mr. O’Connor gave evidence that as far as he was concerned he had already sent engrossed leases to the defendants’ solicitors and he had sent a copy of the lease by email. Therefore he expected that the defendants would execute the lease and guarantee and return a cheque to him by the 26th March. I accept this explanation. (I should also say that Mr. O’Connor was of course also involved in sending emails in relation to the withdrawal of the planning application and did have some telephone calls and email exchanges with Mr. Carty in respect of this matter). 26th March, 2014 - the day the lease should have been executed 22. Mr. Carty also indicated to Mr. O’Connor that he was currently waiting on funds to close. Thus, in effect, Mr. Carty was saying that he was still not in funds to close the deal on the day it was due to close. Mr. O’Connor sent an email to Mr. Reynolds to confirm these matters. Mr. Reynolds gave evidence that his immediate reaction was one of panic because the defendants were not closing the deal on that day and were not in funds to close the deal. 4th April, 2014
25. It appears that the defendants or their solicitors were unable to confirm that the agreement would in fact close on 9th April, 2014. Clearly John Reynolds and AIB were alarmed by this and as a result Mr. Reynolds instructed his solicitor to write a letter dated 8th April, 2014 to Mr. Carty. This letter stated as follows:
We refer to previous correspondence in relation to the above matter. As set out in previous correspondence, both our clients and his bank are concerned at your clients continued failure to execute the leases in accordance with the terms of the court order. Both our client and the bank have asked us to confirm in unequivocal terms a day on which your clients now propose to execute the leases and furnish the rents in accordance with the closing schedule already furnished herein. We are further instructed in default of your clients executing the leases and providing the rents and stamp duty this week, our client will regard the continued failure on the part of your clients to comply with the terms of the court order, as a breach of the terms of the court order. Accordingly both our client and the bank reserve their position in this matter. We look forward to hearing from you as a matter of urgency. Yours faithfully” 27. Mr. Ormond gave evidence that although they received this letter from Mr. O’Connor, it was accompanied by a telephone call from Mr. O’Connor to Mr. Carty to say that he was sending a strong letter because Mr. O’Connor was being directed to send this by the bank. I note this evidence but in my view it is to completely misunderstand the dynamics of what was going on. It is clear that Mr. Reynolds was most anxious to complete the transaction at this time; it is also clear that AIB was putting Mr. Reynolds under pressure to complete this transaction; it is also clear that Mr. O’Connor wrote in strong terms on behalf of his client. Any telephone call which accompanied this letter might have been in a more conciliatory mode to try to coax the defendants along to sign the transaction as quickly as possible, and perhaps to explain to Mr. Carty (as a professional colleague) why such a letter was being sent. In any event, the letter was a clear warning to the defendants that time was running out and that their continued failure to execute the lease was a breach of the terms of the court order. Defendants’ letter of 9th April, 2014
Further to your letter of 8th inst. and our telephone conversation in relation to same you might know that we are taking our clients instructions in relation to the comments contained therein and will revert in due course. We had originally agreed to complete on 25th of April as per our meeting on 2nd April last. You should know that we are awaiting from you engrossments of the lease as discussed, confirmation in relation to the consent for the provision of the sky walk on the building, confirmation of the ownership of the rear stairways together with the draft consent from both the bank and the receiver in this matter. We will also require from you confirmation that the licence is still in place, a copy of the licence and an undertaking from the receiver to transfer same into our clients name. You should also be aware that there is a leak on the ground floor which has become worse due to your clients failure to complete this lease over the last two years as this is a full FRI lease and in such circumstances we will be calling on your client immediately upon completion to repair this leak. You might confirm the position by return. Yours faithfully.”
(2) Confirmation in relation to consent for the provision of the sky walk on the building. (3) Confirmation of the ownership of the rear stairways. (4) Draft consent from the bank and the receiver. (5) Confirmation that the licence is still in place, (6) Copy of the licence and undertaking from the receiver. (7) The issue of the leak on the ground floor and calling on Mr. Reynolds to repair the leak. 31. However raising issues such as the consent for the provision of the sky walk, and confirmation of the ownership of the rear stairways were, in the plaintiff’s view, in effect seeking to add new conditions to the agreement. These issues had been gone into in great detail in the first set of proceedings. Indeed Mr. Reynolds’ evidence was that he had gone to considerable lengths to arrange a hand-holding and transfer meeting between himself, the defendants (Mike Ormond) and Clancourt Properties - the adjoining land owner so that Mr. Ormond could get total clarity of the situation on the sky walk and the rear stairways. 32. Mr. Ormond in his evidence stated that the issues set out in this letter of the 9th April, 2014 in relation to these matters were simply “information” matters and were not in any way intended as extra conditions before the deal closed. 33. It is however, difficult to accept this evidence for a number of reasons. Firstly nowhere in the letter of 9th April, 2014 - or indeed in any subsequent correspondence - is it ever suggested that all that is being sought is information and that the non-provision of such information would not be allowed to block the deal. The exact opposite is in fact the case. Thus, by letter dated 2nd July, 2014 the defendants’ solicitors wrote to the plaintiff’s solicitors and stated:
(8) Confirmation regarding the consent given by your client for the provision of the sky walk on the building (9) Confirmation of the ownership of the rear stairways. Subject to the above and the attached we confirm as per our pleadings we are ready willing and able to complete this transaction and close this agreement.” 34. Secondly, the defence and counterclaim, filed on behalf of the defendants, specifically referred to these two matters of the sky walk and the rear stairways and plead that they are essential to the completion of this transaction. 35. Thirdly, Mr. Ormond said in his evidence that the real reason he was seeking information about the sky walk and the rear stairways was because these were the source of the leaks on the premises and he needed to obtain further clarity on these points. It is also clear from Mr. Ormond’s evidence that he specifically directed Mr. Carty to insert all of these conditions in the letter of 9th April, 2014. In my view, the defendants deliberately raised the issue of the repairs of the leak because they clearly wanted to negotiate some form of concession from Mr. Reynolds on the cost of repairing the leak. It is also important to note that by the time this letter was sent (i.e. 9th April, 2014) the defendants were in full possession of an architect’s and QS’s opinion that the cost of putting right the repairs to the building because of the leaks would amount to some €750,000. This must have come as a shock to the defendants. It is clear from Mr. Ormond’s evidence that he directed Mr. Carty to write this letter and insert this condition about the cost of repairs because he wanted Mr. Reynolds to take on the liability for the repairs or because he wanted Mr. Reynolds to be equally liable for the cost of repairs. Mr. Ormond’s evidence was that he hoped that common sense would prevail on this issue. However there is nothing in this letter or indeed subsequent correspondence which would indicate that the defendants were only seeking a contribution towards the cost of repairs. 36. Thus, the letter of the 9th April, 2014 sent by the defendants’ solicitors marks the second step at which the entire transaction began to go off the rails, because of the defendants’ insistence on raising issues about the consent for the provision of the sky walk, the ownership of the rear stairs and most importantly the demand that the plaintiff repair the leak. Plaintiff’s reply on 11th April 2014 38. In his letter of 11th April, Mr. O’Connor also dealt with the issue of the engrossment of the lease and stated:
40. In this letter of 11th April, 2014 Mr. O’Connor also dealt with the issue (which had been raised on 2nd April by the defendant solicitors) as to whether it might be possible to release Mr. Dolan as one of the guarantors. Again it should be noted that this was an issue raised by the defendants only after the closing date had come and gone. In any event, the plaintiff’s clear response was that “Our client’s instructions are to the effect that the lease proceed in accordance with the terms of the settlement agreement herein”. Therefore it is clear that Mr. Dolan was not going to be released from the guarantee. 41. Mr. O’Connor also stated that the issues in relation to the sky walk and the ownership of the rear stairs were extraneous matters and did not relate to the completion of the transaction in accordance with the terms of the court order. Curiously no reference was made to the repairs to the leak. 42. Mr. O’Connor also confirmed that the licence was in place and would be assigned to the defendants. The letter also called on the defendants’ solicitors to confirm that the defendants were in a position to execute the lease and the guarantee. Again it is clear, from this letter, that Mr. Reynolds was ready, willing and anxious to complete the lease. 43. Mr. Carty then went on holidays from the 12th to the 24th April. However despite this he sent a reply dated 16th April, 2014 referring to the plaintiff’s solicitor’s letter of the 11th April, stating that they were taking their clients instructions and that they would revert. 44. This brought an immediate reply of the same date from the plaintiff’s solicitors stating that the defendants were due to execute the lease on 26th March, 2014 and that Mr Reynolds was “at a loss to understand why your clients have not delivered the leases duly executed together with the deposit and stamp duty”. The letter also stated that if the plaintiff did not receive confirmation by close of business the following day, the plaintiff would arrange to re-enter the matter before the court. It also requested whether Mr. Carty had authority to accept service of proceedings. 45. Again, one would have thought that on receipt of this letter the defendant would have sent the leases by return. 17th April 47. Despite the clear urgency of the matter neither the defendants nor their solicitors responded to the plaintiff between 17th April and 24th April, 2014 - (although I accept that this was the Easter break). 24 April, 2014 - issuing of proceedings 49. Thus on 12th May, 2014 the plaintiff was forced to make an ex parte application to the High Court for an order for substituted service in respect of the second, third, fourth and fifth named defendants in this matter. They obtained such an order which provided for service of the proceedings on the defendants’ solicitors. The proceedings were then served on the defendants’ solicitors on 12th May, 2014. 50. I pause here to note that this in itself was a very surprising turn of events. Despite a letter dated 16th April, 2014 demanding confirmation from the defendants that the defendants would close, and failing such confirmation, that Mr. Reynolds would re-enter the matter before the court, no reply whatsoever appears to have been received by the plaintiff’s solicitors until after the 12th May, 2014 - when the plaintiff served the proceedings on the defendant. Again, the plaintiff’s actions in issuing proceedings and in seeking an order for substituted service are all steps which establish clearly that the plaintiff was ready, willing and anxious to conclude the transaction, in accordance with the court order, as quickly as possible. By contrast, the actions of the defendants in refusing to confirm whether or when they would sign, by refusing to reply to solicitor’s letters, by refusing to instruct their solicitors to accept service of proceedings, by evading service of proceedings (although I note that this is contested) and by not doing anything even though proceedings were issued are all indicative of the fact that the defendants were not ready, willing and able to execute the transaction by the 27th March or indeed by the 12th May, 2014 but were instead for their own reasons playing for time or jockeying for position. Whether this related to the issues on the cost of repairs or whether it related to issues in relation to the sky walk and/or the rear staircase is, in some respects, almost beside the point. It is clear that the defendants took no steps to either abide by the court order or indeed to permit the plaintiff himself to comply with the court order. 51. Moreover on 14th May, 2014 the plaintiff issued and served a motion to admit these proceedings into the Commercial Court. This motion and these papers were served on the defendants’ solicitors by letter dated 14th May, 2014. The application to enter the matter in the commercial list was made returnable to 26th May, 2014. On 20th May, 2014 the plaintiff served a statement of claim on the defendants. 52. On 26th May, 2014 the matter was admitted to the commercial list. 53. I pause here again to note that it is extraordinary that if the defendants were so anxious to complete the transaction (as they kept stating that they were) that they did not simply immediately execute the leases and return the deposit cheques to the plaintiff’s solicitors. Mr. Reynolds’ evidence at all times was clear and consistent: if he had received the leases and guarantees signed by all parties and the deposit monies he would have executed the transaction immediately. 54. The proceedings were entered into the commercial list on the 26th May, 2014 and directions were given in relation to the exchange of pleadings and the filing of a defence. It is also noteworthy that the defendants gave an undertaking to file an appearance. However by 18th June, 2014 neither of these matters had been done. This forced the plaintiff’s solicitor to write to the defendants’ solicitors on 18th June, 2014 pointing out that an appearance had still not been filed and the defence which was supposed to have been filed on the 17th June, 2014 had still not been filed. This letter also threatened a motion seeking judgment, I pause here to note that yet again it is the defendants who were dragging their feet despite their protestations that they were at all times ready, eager and willing to execute the transaction. By contrast the plaintiff’s actions all show that he was ready, willing and anxious to complete the transaction. 55. Indeed, by 24th June, 2014 the defence still had not been filed - despite the express High Court order to that effect - and the plaintiff was forced to issue a motion seeking judgment compelling the defendants to file their defence. This motion was sent to the defendants solicitors by letter dated 24th June, 2014. It was made returnable to 30th June, 2014. 56. On 27th June, 2014 the defendants belatedly filed their defence in this matter. 57. Mr. Reynolds’ solicitor wrote to the defendants’ solicitor on 27th June, 2014 noted that it had received the defence and stated:
(1) Has the lease been sealed by the company? (2) Are the guarantees executed by the four parties and available to be handed over? (3) Are you in funds?” A response to the foregoing is requested as a matter of the utmost urgency and is requested without prejudice to either party’s position in this matter.”
(2) The guarantees are physically attached to the lease document but are executed and available. (3) We are in funds for both the closing price of €180,000 and stamp duty in the sum of €5,000 to be handed to your office on completion. We await hearing from you.” 60. This letter of course brought about an entirely appropriate response from the plaintiff’s solicitors who replied by the same day - 30th June, 2014 and stated “we now ask that you furnish to this office by return, the agreed form of lease and guarantees as executed”. 61. This letter elicited no response and so the very next day on 1st July, 2014 the plaintiff’s solicitor wrote to the defendants’ solicitors again stating:
63. On 2nd July, 2014 the defendants’ solicitor wrote another lengthy letter to the plaintiff. Again because of the importance of this letter in understanding the sequence of events, I set it out in full herein:
Dear Sirs Further to yours of 30th ult.. and first inst. we enclose herewith as requested lease and guarantee in duplicate executed by our clients. We would ask you to note that the attached are forwarded to you on a strictly without prejudice basis to the current proceedings in this matter and our clients rights to recover damages from your client for the damage caused to the premises known as The Pod, Harcourt Street, Dublin 2 due to water ingress arising as a result of inter alia your clients negligence, disregard breach of duty, breach of statutory duty relating to the protection of the premises. Further for the record we note that we have not received clarification to the issues raised in our letter of 9th April last which we would imagine are essential to the completion of this transaction: (1) Confirmation regarding the consent given by your client for the provision of the sky walk on the building. (2) Confirmation of the ownership of the rear stairways. (3) Consent from the mortgagee in this matter. (4) Consent from the receiver in this matter. (5) Confirmation regarding the liquor licence attached to the premises namely that same is in order and remains in place. Subject to the above and the attached we confirm as per our pleadings, we are ready, willing and able to complete this transaction and close this agreement. We await hearing from you, Yours faithfully” 65. Moreover, the defendants were again raising - almost three months later -matters which had been raised in their letter of the 9th of April and which they stated “are essential to the completion of this transaction”. Again it is clear that the defendants were maintaining, in addition to normal closing issues (e.g. consent from the receiver and consent from the mortgagee and matters about the liquor licence,) a number of extra conditions which were not agreed between the parties on 5th March, 2014 and which therefore were not recorded in the court order of 5th March, 2014 (e.g. the issues about the cost of repairs due to water ingress, the sky walk issue, the rear stairways issue etc.) Thus the defendants’ position as at 2nd July, 2014 was still obdurate. They were, they said, ready, willing and able to close the agreement but only if extra conditions were agreed. This of course was not what the plaintiff had agreed with the defendants on 5th March, 2014. Again it is clear that the plaintiff, by virtue of all of his actions showed a consistent intention to execute the transaction as quickly as possible. By contrast the defendants’ actions are all only consistent with the objective of seeking to delay, prevaricate and avoid execution of the agreement. 66. This letter evinced an immediate reply by the plaintiff’s solicitor dated 3rd July, 2014 which stated as follows:
Please confirm the following by return (1) That in accordance with the terms of the agreement for lease with guarantee and of the lease itself, your clients will take the premises as is. (2) That your clients accept that our client has no liability whatsoever to your clients in respect of any alleged damage which is denied which is said to have been caused by ingress of water. In this regard we draw your attention to clause 8 of the agreement for lease with guarantee and the terms of the lease itself. (3) We have reviewed the lease as executed by your clients and furnished to this office and note that the commencement date of the term of the said lease is 20th September, 2012. Kindly confirm therefore that your clients will commence the payment of the rent reserved under the lease immediately upon execution thereof by our client. (4) It has come to our client’s attention from a third party that there may be a misapprehension on your client’s part as to the correct interpretation of the guarantee provided by the guarantors at the fifth schedule of the lease. For the avoidance of any doubt the liability of the guarantors or each of them shall not exceed the sum of €260,000 in each and every year of any default on the part of the tenant or a sum which equates to 50% of the annual rent in each and every year of any default on the part of the tenant which gives rise to a liability under the guarantee whichever is the greater. Accordingly the guarantors are potentially liable to pay a sum equivalent to up to half the rent reserved under the lease in each and every year of the twenty year term created thereby. Please confirm by return that you accept the position as set out above Yours faithfully
Further to yours of the 3rd inst. we reply as follows (1) Our clients had not been afforded any opportunity to inspect these premises prior to the order of the High Court on 5th March, 2014. Your client refused to complete this transaction for a period of eighteen months and during that time allowed severe damage to be caused to the premises which will necessitate huge expense for our client in rectifying same. (2) When then agreement for lease was entered into over two years ago our client was then happy with the state of the premises. However since that time your client has allowed the premises to fall into disrepair and in particular has allowed the premises to suffer water damage which to date your client has not remedied. The agreement for lease in this matter does not relieve your client of his obligation to protect the premises for the benefit of our client pending our client taking up lawful occupation of the premises. In short the completion does not deprive our client reserving their position via any action they may take against your client for the damage caused to the premises. 69. The defendants’ letter also took issue with the terms of the guarantee. 70. On 6th July, 2014 the plaintiff’s solicitor replied. This letter states as follows:
Again we have taken our clients instructions and the state of the premises was known to your client at the date of the hearing in the High Court in March 2014 when the parties settled the proceedings on foot of your clients oral evidence under oath that your clients were ready, willing and able to close the transaction. It is now not open to your clients to introduce new elements that could have been addressed during the negotiations that lead to the terms of settlement of 5th March, 2014 that were entirely foreseeable and known to your clients and while the premises remained unoccupied for approximately two years. Your clients chose not to seek to introduce terms in the settlement at that time in circumstances where at all times your clients would take the premises ‘as is’. It would appear therefore that your clients are now seeking to introduce further pre-conditions before closing to which they are not entitled. Further as previously advised to you, confirmation of consent in relation to the provision of the sky walk and the ownership of the rear stairways cannot now be imposed as pre-conditions before closing by your clients. …… The attempt to introduce further pre-conditions is another attempt on the part of your clients to renege on the terms of settlement and earlier agreement.” Accordingly on the grounds that it is quite clear that your clients are not willing to complete the transaction, in all of the above circumstances, the current proceedings will now proceed and our client will continue to seek damages on foot of same. Yours faithfully”. 72. Subsequently correspondence was exchanged between the parties in relation to discovery and discovery was agreed. By letter dated 16th July, 2014 the defendants indicated that the affidavit of discovery would be signed by Mr. Ormond and sworn within the next eight weeks. Again I pause to remark how slowly the defendants at all times were moving at this stage. If they truly had been ready, willing and anxious as they say they are to complete the transaction then one would have thought that they might have made the discovery - which was extremely limited - within a period of two weeks. 73. The matter came before the Commercial Court again on 25th July, 2014. By letter dated 25th July, 2014 the defendants’ solicitors wrote to the plaintiff’s solicitors indicating that, subject to the execution of the agreement in writing, that the following payments would be made by the defendants to the plaintiff forthwith
(2) Payment of €130,000 for rent repayments (3) €5,000 for stamp duty. 75. On 30th July, 2014 the proceedings were back before the Commercial Court and the plaintiff’s solicitor wrote to the defendants solicitors on that day stating:
(1) That your office is in the necessary funds so as to close the transaction (2) That your clients are in a position to close the transaction today. We await hearing from you as a matter of urgency.” 77. However on 30th July, 2014 - the same day - the defendants replied as follows:
Further to your letter of even date we confirm that we are awaiting signatures on the documentation necessary to complete this transaction as soon as the documentation is signed we will forward it to you for completion. [sic] Funds are in place to close this transaction and will be given to you on completion Yours faithfully” 79. In any event, it appears that the plaintiff at this stage, decided that enough was enough and that the defendants were still not ready, willing or able to complete the transaction. As a result the plaintiffs solicitors wrote to the defendants solicitors on the 31st July, 2014 as follows saying:
We refer to previous correspondence in relation to the above matter and our recent attendances before the Commercial Court. We refer specifically to the representations to the court made by your counsel to the effect that the lease guarantee and settlement agreement were not signed by all the defendants. Given your clients belated admission yesterday they are not in a position to comply with the terms of the court order on 5th March last, we wish to advise that we are instructed that our client will not now seek specific performance of the agreement referred to above but rather will seek damages in lieu. Furthermore in an attempt to minimise his losses our client now proposes to deal with other interested parties in relation to the said property and the purpose of this letter is to formally put your clients on notice of this fact”. 81. It is surprising that this letter of 31st July, 2014 did not bring about an immediate response by the defendants. Instead, two weeks later, on 14th August, 2014 the defendants’ solicitors wrote to the plaintiff’s solicitors saying as follows
We refer to the above and enclose herewith the following (1) One part lease duly executed by all our clients (including the guarantee) (2) One part settlement agreement duly executed by all parties We hereby confirm all funds required to complete this transaction as per settlement agreement are available and we await hearing from you regarding completion Yours faithfully” 83. On 15th August, 2014 the plaintiff’s solicitor replied saying that the plaintiff’s position remained as set out in his letter of 31st July and returning the documentation with the letter. 84. Five days later - on 19th August, 2014 - the defendants replied stating that they were surprised to receive the plaintiff’s letter of the 15th of August and that the defendants were now in a position to provide all signatories and had provided all duly executed documentation. They also confirmed that funds were available to complete this matter. Evidence of John O’Connor 86. In the critical period between 5th of March 2014 - when the court order was made - and 26th of March 2014 when the lease was due to be executed - Mr. O’Connor gave evidence of an exchange of emails between himself and Mr. Carty (solicitors for the defendants) about the issue of the withdrawal of Mr. Reynolds’ planning objection to An Bord Pleanala. This exchange of emails occurred between 6th of March, 2014 and 10th of March, 2014. When asked why there had been no further email exchanges or telephone calls between himself and Mr. Carty between 10th of March and 26th of March, his evidence was that he was simply waiting for the defendants to execute the lease and to return a signed lease and guarantee, and a cheque. He assumed that they would have been executed and returned to him, on or before the 26th of March 2014 and that Mr. Reynolds would simply come into his office on that date and execute it. He did accept however, that perhaps he could have telephoned Mr. Carty a couple of days before the 26th to ensure that everything was on track but in my view nothing turns on this. Indeed Mr. Carty could also have contacted him. He also gave evidence that he had emailed a copy of the agreement for lease (with lease attached and the guarantee) to Mr. Carty in or about 2012, that there were no further changes to that lease and therefore there was no need for him to send a further email of the lease to Mr. Carty. He also gave evidence that he had in fact sent engrossed copies of the lease and guarantee to Mr. Carty in 2012. He was therefore of the view that Mr. Carty had engrossed copies and a soft copy of the lease to sign. Whilst it subsequently transpired that the engrossed copies of the 2012 lease had been signed by all the defendants in or about September, 2012 they had not been returned to Mr. O’Connor. Therefore he was not aware that the defendants had signed these engrossed copies. However, again, nothing turns on this because Mr. O’Connor’s evidence was that Mr. Carty could simply have printed out a fresh copy of the lease from the email copy on judicature paper. His evidence was that an engrossed lease was simply a copy of the final lease printed out on judicature paper. 87. Importantly, he also gave evidence that as an experienced conveyancer it was perfectly common in conveyancing practice for solicitors to simply amend the start date of the lease, to execute that amended lease and to return the executed lease in this form with a covering letter to the other side explaining the amendments. Thus, it was at all times open to Mr. Carty and the defendants to adopt this practice. Payment of Deposit 89. Mr. Clinton also gave evidence that on 26th May, 2014 (i.e. the same day that he arranged the transfer to the defendants’ solicitors to discharge their legal fees) he received a cheque in the sum of €295,000 from Mr. Thomas Anderson. This was apparently a cheque drawn on Mr. Anderson’s AIB account in Cork. Mr. Clinton then lodged this cheque to his own account. 90. Subsequently on 6th June, 2014, on foot of a further request from Mr. Ormond to Mr. Clinton, Mr. Clinton arranged to transfer the sum of €185,000 from his account, to that of his solicitors, Orpen Franks. Subsequently Orpen Franks, on his instruction, forwarded €185,000 to Mr. Carty (the defendants’ solicitors) account on 12th June, 2014. However importantly Mr. Clinton’s solicitor, Orpen Franks, sent an email on 12th June to Simon Carty saying that
92. Thus, given that this new condition was not fulfilled as at 12th June, 2014 - because it was neither waived nor agreed - it is clear that as at the 12th June, 2014 the defendants were not ready, willing or able to close the agreement for lease. It may well be that the defendants’ solicitor had funds in his account to close the transaction but this was now subject to a specific condition which had not been agreed with the plaintiff and/or waived by Mr. Clinton. In those circumstances I find as a fact that as at 12th June, 2014 the defendants were still not willing, ready and able to close the transaction. 93. Mr. Clinton gave evidence that he added this condition about the condition of the building because he wanted it to be put “on the table”. He said he was trying to be helpful. He said that he examined the state of the building and he was of the view that it clearly needed to be remediated before the tenants were to take it over. Mr. Clinton gave evidence that he was not aware of the court order. Thus, he introduced the “conditionality” without knowing about the court order. His evidence was that the only reason he participated in this chain of payments was to facilitate business colleagues and business associates. 94. One of the issues which concerned me during the course of this trial was why monies were being paid in such an utterly circuitous route. For example: the defendants had to pay their solicitors €137,000 for legal fees and they also had to pay their solicitor €185,000 as deposit for the lease. The defendants’ case is that they were at all times ready, willing and able to do so. However instead of Mr. Anderson or Mr. Ormond writing a cheque to their solicitors for both these sums, the defendants decided to pay these amounts of money to Mr. Paul Clinton - who at this point was a stranger to the transaction, was not a shareholder of Altomoravia, was not a signatory to the lease and was not a guarantor on the lease - and ask him to pay these sums over to the defendants’ solicitor. When Mr. Clinton was asked as to why this circuitous route had been chosen to effect these payments his answer was quite revealing. He stated, on day 9, at p. 32 of the transcript: “I think that - hopefully Mr. Anderson will be able to address that. But it wouldn’t surprise me - my dealings with these gentlemen for the previous six years, it would be totally within character for that kind of…..I was going to say that kind of carry on, but that would be - I don’t want to use the word “messing” but that would be - yeah I could - it didn’t shock me at all when Mike mentioned this in passing and it saved him making ---when he left me on the Sunday evening, chasing off and trying to track down Tom and making other arrangements. I was just making life easy. I was facilitating the situation which I didn’t see as absurd. I saw it as more kind of that’s normal inter partner relationship.” 95. That may well be so but it certainly strikes me as a very curious way for the defendants to behave on 26th of May, 2014 when there was a court order in place that the agreement should be specifically performed and executed by all parties on 26th March, 2014, and when court proceedings had been issued in respect of this matter. The ambiguity about the guarantee 97. The evidence establishes that Mr. Reynolds met Mr. Colin Dolan, the fourth defendant, on or about 14th May, 2010 and they had a conversation about the nature and scope of the guarantee. Mr. Dolan asked Mr. Reynolds whether he could be released from the guarantee and Mr. Reynolds indicated that he could not. A discussion ensued as to why not and it is clear that Mr. Reynolds had a different view of the guarantee to Mr. Dolan. This sent alarm bells ringing in Mr. Dolan’s mind and he decided to seek independent legal advice from his own solicitors, J. A. Shaw of Edenderry, County Offaly. Mr. Dolan gave evidence that he was now becoming confused about the issue of the guarantee because he had one version from Mr. Anderson, one version from Mr. Ormond, another version from Mr. Carty, and another version from Mr. Reynolds. He wanted to consider the matter further and to get legal advice on it. As a result, Mr. Dolan’s solicitors wrote to Mr. Carty seeking clarification of the guarantee and a copy of the lease. They also indicated that under no circumstances was the copy of the lease which Mr. Dolan had executed in September, 2012 to be used without their knowledge or consent. It appears that Mr. Dolan’s solicitor took a similar view of the potential construction of the guarantee as Mr. Reynolds. Mr. Anderson in the witness box argued forcibly for a different interpretation of the guarantees, on the grounds that he had negotiated it and he knew what it meant. However, when asked what might happen if he were to die and the scope of the guarantee fell on the other defendants it appeared that he had not considered this possibility. In any event the interpretation of a document such as a guarantee is an objective interpretation. Whilst I do not need to interpret the guarantee for the purposes of this case, it seems to me to be self-evident that there were a number of possible interpretations of the guarantee and that Mr. Reynolds was acting reasonably in pointing these out to Mr. Dolan. Mr. Anderson sought to contend that, in fact, Mr. Reynolds “frightened the wits out of Mr. Dolan” or was “getting to Mr. Dolan” with a view to frustrating the transaction but I do not believe that this is a fair representation of events. It is also inconsistent with the fact that Mr. Reynolds was, at the same time, about to issue proceedings to enforce the agreement and issuing warning letters to the defendant to execute the agreement or he would re-enter the proceedings. 98. More surprisingly, it emerged in the course of this trial that, in fact, the defendants’ solicitor, Mr. Carty, had been in receipt of letters from Mr. Dolan’s personal solicitors (J.A. Shaw of Edenderry) specifically warning Mr. Carty not to send over copies of the 2012 executed lease as his client would no longer regard himself as being bound by this agreement and guarantee. It was therefore wrong of the other defendants (Mr. Anderson and Mr. Ormond) to instruct Mr. Carty to send over this 2012 lease in these circumstances. I have considerable sympathy for Mr. Carty who explained that he was the subject of conflicting instructions from his clients. However the defendants’ behaviour in this regard yet again shows a clear intention to delay, prevaricate and obfuscate. 99. Thus, it emerged in the evidence, but not in the correspondence, that, from 14th May, 2014 until 5th August, 2014 one of the defendants - Mr. Dolan - was not prepared to execute the lease and guarantee in its current form. Indeed Mr. Dolan refused to sign the guarantee until he had negotiated an express indemnity from the other defendants to indemnify him against the consequences of the guarantee. This indemnity was negotiated between the defendants among themselves and was signed by all the defendants on or about 5th August, 2014. It was only when this indemnity was signed that Mr. Dolan then agreed to sign the lease and guarantee. Thus the defendants were not ready, willing or able to sign before early August, 2014. 100. By virtue of this guarantee problem, Mr. Dolan refused to sign the guarantee until 6th August, 2014. This delay meant a delay of almost four and a half months from the original date of execution of 26th March, 2014. The issue of the water damage
“It is therefore reasonably argued that in commencing a lease as of today’s date the property is in an inferior condition to that intended to be demised at the time the agreement for lease was executed. In our view it would appear unreasonable for the tenant to have to make good works to the premises which are solely attributable to the building remaining unoccupied since the agreement to lease was executed in April 2012.” 103. Mr. Ormond was cross-examined by Mr. Hayden S.C. for the plaintiff on the issue of the condition of the building. The critical point was whether, when the defendants entered into the agreement on 5th March, 2014, it was part of that agreement that the defendants took the building in the condition it was in at that time. At Day 8 page 52 the following exchange took place “Mr. Hayden: You know you signed the agreement on 5th March to take it as was having inspected it, isn’t that correct? Answer: I do in retrospect, Judge, yes. Judge Cregan: Sorry? Answer: I do accept now I signed an agreement to take the building as it was Judge.” 104. In another exchange on day 8 page 54 it was put to Mr. Ormond in cross examination
Answer: Yes, Judge, I accept that” Question: Even though you settled taking the premises as it was, why are you raising with your solicitor, through your solicitor on the 9th of April, in response to a request to close, why are you raising this issue you must carry out repair works? Answer: Because the building had been in such a bad state of repair I wanted to know was he prepared to do anything in relation to how he deliberately left the building fall into disrepair because it was quite a shock to us when we actually got the building surveyed by a quantity surveyor and architect the extent of the damage that had been done in my mind a deliberate act.” The renegotiation of the defendants’ partnership 107. In addition Mr. Clinton confirmed that Mr. Ormond had stated to Mr. Clinton that they would have to take the building as they found it (i.e. in the condition it was on 5th March, 2014 when the court proceedings were settled.) Mr. Clinton’s view was that he disagreed with that assessment. 108. It is clear from the evidence that the defendants were in a complete state of flux around the time this agreement should have been executed. In addition to the difficulties of Mr. Dolan, which have been set out above, it now appears that the defendants wished to introduce Mr. Clinton into Altomaravia and have him participate in the project as a 25% shareholder. Because Mr. Clinton was coming on board as a business partner in relation to Altomaravia and The Pod, and because Mr. Clinton was an existing business associate of some of the defendants, the defendants asked Mr. Clinton to make certain payments on their behalf. Mr. Clinton agreed to do so. However, in agreeing to do so, and in particular in agreeing to make the deposit funds available, he also sought to introduce a condition into the agreement namely that the deposit funds were being paid over, only on condition that the condition of the building was improved. Therefore, what the defendants were doing through their own machinations and internal wranglings was introducing a new condition that the contracts would not be executed until the condition of the building was improved. This was clearly a violation of the agreement/court order of 5th March, 2014. It was clearly not something which had been contemplated or agreed between the parties on 5th March, 2014. It also clearly establishes that, as at the 12th June, 2014 the defendants still were not ready, willing and able to complete the transaction because they were insisting on extra conditions being added to the agreement. Evidence of Thomas Anderson 110. Mr. Anderson, from his evidence, seemed to have a strange relationship with his solicitor, Mr. Simon Carty. It appears that he never spoke to Mr. Carty; he gave all his instructions to Mr. Ormond and he expected Mr. Ormond to then pass on these instructions to Mr. Carty. He seemed to adopt a position of distrust towards his solicitor for no apparent reason which I could identify. Mr. Anderson is a successful businessman who owns or controls approximately 50 companies in Ireland and the UK which employ approximately 2000 people. He is clearly very familiar with property transactions, business deals, lawyers and court processes. He referred to numerous dealings he had with solicitors and barristers. He resides in the UK. On the date of the settlement, 5th March, 2014, he was not present in court when the negotiations were being carried out by the plaintiffs and the defendants but he was in the UK and he was consulted by telephone, by Mr. Ormond, at all relevant times before the proceedings were compromised and he was aware of all relevant terms of the settlement agreement and indeed the court order. 111. In relation to Mr. Carty, who is Mr. Anderson’s solicitor, Mr. Anderson said as follows on day 9 at pp. 42- 43 of the transcript:
Answer: Yeah, well he is not my solicitor, you see. You have got to bear in mind I have never met Mr. Carty before this process. I have a whole team of lawyers in the UK and Ireland of which Mr. Carty is not on my slate. And I have had no interaction with him. It was all done through Mike who chose him in the first place, and I am not saying he’s right or wrong, and who could direct him as best he could. Question Mr. Justice Cregan: But Mr. Carty is acting on your behalf. Answer: He is acting on behalf of the company.
Answer: In a formal sense yes. Question: Well, in a formal sense he is the individual who you have appointed to represent you? Answer: No, I didn’t appoint him. Question: Well how is he acting for you then? Answer: He is acting because I allow Mike to decide who the lawyer was to be and instruct him as best he could. Question: Well then did Mr. Ormond have your authority to appoint Mr. Carty on your behalf? Answer: He made the appointment and I didn’t disagree with it. Question: Is that a long way of saying yes, Mr. Anderson? Answer: I actually don’t know, your honour. Question: I take it… Answer: You have got to understand that Mr. Carty has no idea of what my status is, and I don’t want him to know. He has no idea whether I have funds or not, and I don’t want him to know because I do not want guys like that putting pressure on me who I don’t know. Question: What do you mean guys like that? Answer: People who aren’t on my slate. Question: He is your solicitor. You hardly think he is some fellow off the road. He is your solicitor. What you mean “guys like that”? Mr. Carty is a professional carrying out his job as best he can on your behalf. Are you telling me you don’t trust him? Answer: He doesn’t know me. 113. Again he was asked, on day 9, p. 45 of the transcript:
Answer: I don’t know him. Question: So you have appointed Mr. Carty to act on your behalf? Answer: Yes.” Question: But you are not able to say in this court that you trust your solicitor? Answer: I wouldn’t leave him hold money pointlessly unless it was absolutely required at the time, so in that sense I trust him, if I was to give him money on Monday for Monday then I have no problem in trusting him, absolutely not, he is an officer of the court.” 115. Moreover, despite Mr. Anderson’s familiarity with property transactions - and indeed court proceedings - he seemed to have scant regard for the discovery process. The plaintiffs wrote a letter seeking voluntary discovery from the defendants on the 9th July, 2014. Mr. Anderson’s evidence was that this letter was read to him over the phone by Mr. Ormond and he gave instructions to consent to discovery in those terms. Therefore the defendants’ solicitors wrote to the plaintiff’s solicitors on the 16th July, 2014 consenting to the categories of discovery being sought by the plaintiff. Indeed the plaintiff’s request for discovery was focused and consisted of only two categories of documents. The first and most important category was discovery of all documents relevant to the issue of proving how the defendants were ready willing and able to provide the deposit funds. Mr. Mike Ormond, on behalf of the defendants, swore an affidavit of discovery. This affidavit of discovery discovered one document, i.e. the solicitor’s account of Mr. Carty showing a transfer of €185,000 from Orpen Franks to Simon Carty on or about the 12th June, 2014. No other documents were discovered. 116. Subsequently however, Mr. Anderson swore a witness statement in February, 2015 in these proceedings - just before the case started. In this witness statement he exhibited accounts of a company which he directly or indirectly controls called Pearl and Dean which is a cinema company. Every single transaction in these accounts was redacted apart from the amount of funds in the account. The account was a running account from February, 2014 to August, 2014. At the start of the trial an objection was taken by the plaintiff to the fact that these documents should have been discovered. As a result, the defendants swore a second affidavit of discovery exhibiting these documents. What then transpired however was that Mr. Paul Clinton, who had not given a witness statement for either side in these proceedings, was subpoenaed by the plaintiff and gave evidence before the court. In his evidence Mr. Clinton stated that the €185,000 which had been sent to Mr. Carty’s account from Orpen Franks had been sent to Orpen Franks by him, Mr. Clinton. He also gave evidence that this €185,000 was sent by him on behalf of Mr. Anderson who had sent him a cheque on or about 27th May, 2014. This cheque was drawn on Mr. Anderson’s AIB bank account in Cork. However despite the fact that this bank account was clearly caught within the plaintiff’s request for discovery (to which the defendant consented), this bank account and this cheque were not discovered by Mr. Anderson. Indeed the circuitous manner in which the deposit was paid might never have come to light if Mr. Clinton had not given evidence. When he did give evidence there were initial discussions between counsel and submissions to court about whether such a document should be discovered. However in the light of Mr. Anderson’s evidence in cross examination, it was clear that this bank statement was caught within the plaintiff’s request for discovery, was relevant and material and had not been discovered. As a result the defendants made an application to file a third affidavit of discovery. The plaintiff neither objected nor consented to this application and I granted liberty to the defendants to file a third affidavit of discovery. This affidavit was sworn by Mr. Anderson and he exhibited the bank statement and the cheque. 117. It is clear that Mr. Anderson was well aware of the plaintiff’s request for discovery because it was read to him over the telephone by Mr. Ormond. It is also clear that he knew that the flow of funds in respect of the deposit went from his account in Cork, by way of cheque, to Mr. Clinton, because it was his cheque. Despite this however he decided not to discover these documents. Had these documents been discovered then a considerable amount of court time might have been saved in trying to ascertain the unusual route of funds for the deposit monies. Mr. Hayden S.C. for the plaintiff cross-examined Mr. Anderson as to why he failed to discover this document at an earlier stage. No satisfactory explanation was forthcoming. 118. Thus Mr. Anderson deliberately discovered documents from a Pearl and Dean account - which were completely irrelevant because the cheque for the deposit monies was not drawn on this account - and yet failed to discover the relevant bank account and cheque on which the funds for the deposit money had been drawn. This attempt to discover irrelevant documents and not to discover relevant documents can only be characterised as a deliberate attempt to mislead the court. It was an attempt, for whatever reason, to conceal documents from the court. Moreover it was a deliberate attempt to conceal documents from the court because the circumstances of the payment of funds are suspicious to say the least. It is not clear why Mr. Anderson - instead of writing a cheque directly to his own solicitor for the deposit of funds and the legal fees - would leave a cheque under the mat of the front door of his house, get Mr. Ormond to collect this cheque, get Mr. Ormond to ask Mr. Clinton (who had no connection with the lease) to do an electronic transfer of funds to Mr. Anderson’s solicitor, get Mr. Ormond to give the cheque to Mr. Clinton, get Mr. Clinton to transfer funds to Orpen Franks and then get Orpen Franks to transfer funds to Mr. Carty, Mr. Anderson’s own solicitor. The reasons why this labyrinthine route of payment was chosen have never been satisfactorily explained to the court. 119. The extent to which Mr. Anderson sought to mislead the court in relation to the payment of monies is clear when one compares what he said in his witness statement with the evidence which in fact came out of the trial of the action. The issue of the payment of the deposit monies was important because Mr. Reynolds at all times maintained that the defendants were not ready, willing or able to execute the lease and that the defendants did not have the funds in place to pay for the deposit monies. This is denied by the defendants who say that Mr. Anderson is a man of means. However that assertion is not evidence. 120. Mr. Anderson in the final paragraph of his witness statement dated 2nd February, 2015 - days before the trial was due to begin - stated as follows:
122. Thus, the fact that the documents which evidenced this transaction were not discovered by Mr. Anderson is, in my view, an attempt to mislead the court. This is significant in the context of this case where Mr. Anderson is seeking in his defence and counterclaim to enforce compliance with a court order against Mr. Reynolds. In my view, it is not appropriate to treat one’s discovery obligations in such a casual manner and then seek to appeal to the courts to enforce a court order against another party. It is a factor which I have considered in the balance as to whether I should make the order sought by the defendants against the plaintiff. 123. However that is not the end of the matter. In relation to the letter of 9th April, 2014 Mr. Anderson also gave evidence that when he settled the case on 5th March, 2014, he knew that the sky walk and the rear stairways were not part of that settlement agreement. Despite this however he gave evidence that, in his view, “there was more to that than meets the eye”. Indeed he stated as follows at Day 9, page 47:
125. Subsequently he said “I was agreeable to the court order and I knew it did not include the sky walk but I knew at the same time there was more to it than meets the eye about the sky walk and the staircase.” [Emphasis added]. 126. It is clear that the only possible construction which can be put on this evidence is that - despite the fact that Mr. Anderson had actual knowledge that the sky walk and the rear staircase did not form any part of the agreement of 5th March, 2014, - nevertheless he was going to add them back into the negotiations about the closing of the transaction. He did precisely that in his solicitor’s letter of 9th April, 2014. It is clear therefore on the defendants’ own evidence that the defendants sought to add in new conditions into the transaction after the court agreement of 5th March, 2014. To seek to add new conditions before they executed the transaction - in circumstances where they knew that the court order did not include those conditions - is clearly an abuse of process. However, to seek to add additional conditions when Mr. Anderson knew that they did not form any part of the court order and then to seek in these proceedings to enforce the original court order is quite clearly unconscionable and, in my view, is another factor to be borne in mind when considering whether the defendants have a right to enforce the court order of 5th March, 2014. 127. There was considerable evidence from Mr. Anderson on the question of whether the defendants took the building “as is” - meaning the condition in which the building was in on 5th March, 2014. The plaintiff was of the view that it was clear that the defendants took the building “as is” on 5th March, 2014 or on 26th March, 2014 when the agreement was due to be executed. Mr. Anderson however strongly disagreed. His view was that the defendants were taking the building “as is”, namely as it was in September, 2012. However, in my view, such a position is untenable. Firstly Mr. Ormond gave evidence that he absolutely understood that the defendants were taking the building “as is” namely in the condition it was in, in March, 2014. Mr. Anderson sought to state that Mr. Ormond was “being bamboozled” in the witness box under cross-examination but I do not accept that for a moment. Secondly, it is clear that Mr. Ormond told Mr. Clinton that the defendants were taking the building “as is”. Thirdly, it is clear that the agreement for lease dated 3rd April, 2012 which had a commencement date of 17th April, 2012 had now been modified by agreement so that the commencement date was now 26th March, 2014 and the lease provided that the lessees took the building “as is”. It is clear that 26th March, 2014 was now the relevant date for all events in the lease. It is clear from the evidence and from the documents that the defendants took the building in the condition it was in as at March, 2014 and that they knew this to be the case. 128. Another reason given by the defendants for their delay was, as Mr. Anderson said on numerous occasions in his evidence that “if Mr. Reynolds had done everything I deemed he should have done I would have signed it there and then”. However I do not accept this evidence. 129. When asked what should Mr. Reynolds have done before the defendants would sign, Mr. Anderson replied that he should have withdrawn the objection to An Bord Pleanala (which was done), that he should have provided a letter from the receiver in respect of the key, the licence and the other fixtures and fittings (which was done), that he should have provided a letter from the bank confirming that the bank were happy that this proceed (which was done), that he should have had the deeds drawn up and signed and produced to the defendants (which was done). There was nothing else for Mr. Reynolds to do. 130. Mr. Anderson also gave evidence that (because of his view that the defendants were taking the premises in the condition they were in in 2012) he intended to seek to hold Mr. Reynolds liable for the deterioration of the building in the intervening two years. Thus his intention, after he had signed the agreement, was to force Mr. Reynolds to carry out these repairs whether by litigation or otherwise. 131. Having heard all the evidence, it is hard to avoid the conclusion that what Mr. Anderson sought to do was to enter the agreement of 5th March 2014, to force Mr. Reynolds to execute the document by virtue of the court order and then to seek to add extra conditions to that agreement before the defendants executed the document or provided the deposit funds. Mr. Anderson sought to do this in the full knowledge that these extra conditions were not contained in the original agreement. To behave in this manner, in respect of an agreement, is simply unscrupulous behaviour; to permit a defendant to behave in such an unconscionable manner in respect of a court order would be inequitable. A defendant cannot treat court orders with such a lack of respect and at the same time seek to rely on such a court order in an action for specific performance. PART TWO - ASSESSMENT (I) Assessment of the plaintiff’s actions 133. Thus, by way of overview, when one comes to review the chronology of events - and in particular - the inter partes correspondence from 5th of March, 2014 until August/September, 2014 it is clear that Mr. Reynolds was doing absolutely everything in his power to get the defendants to perform their part of the bargain (i.e. to execute the leases and guarantees, and to transfer the deposit cheque for €185,000 to his solicitors). His consistent evidence was that if that had been done at any stage up to 31st July, 2014, he would have gone into his solicitor’s office immediately and executed the lease as required. 134. If one compares and contrasts the behaviour of the plaintiff and the defendants, it is clear that the plaintiff fulfilled everything he was required to do and was ready, willing and able to close on the 26th of March, 2014 as the court order directed. (II) Assessment of the Defendants’ actions
The evidence is that Mr. O’Connor, the plaintiff’s solicitor, telephoned Mr. Carty the defendants’ solicitor on 26th March, 2014. There had not been any interaction between these two solicitors for many days prior to this. However when Mr. O’Connor did eventually contact Mr. Carty he was informed that the main guarantor (Mr. Anderson) was “out of the country”. In fact it emerged that Mr. Anderson was not out of the country but was only in Kerry. The point is however that he was apparently unavailable to execute the guarantee. Thus one of the guarantors - indeed the critical guarantor - was neither ready nor able nor willing to sign the guarantee on that date. If Mr. Anderson intended to be in Kerry, or otherwise unavailable to his solicitor on the 26th March, then he should have made arrangements to have signed the document before that date. He did not do so. Blame for this cannot be laid at the plaintiff’s door. 2. The alleged agreement “to delay the closing until 25th April, 2014” 3. The issue of engrossed leases 4. The lack of funds 5. The letter of 9th April, 2014 Mr. Anderson in his evidence sought to state that these were not conditions that he was seeking to add. They were merely issues he wanted to raise. I do not accept his evidence on this point. Indeed, in his cross examination, he accepted that the issue of the sky walk and the rear staircase had been resolved in the 2014 proceedings. However even though he accepted this, he went on to say that he was still of the view that they were still in the case and that he hoped that some further resolution might be obtained. There is only one way to regard this evidence: it is clear that Mr. Anderson having settled the first case on these terms now sought to renege on that agreement and to reintroduce them as new terms. He did so, in my view, because he was of the view that Mr. Reynolds was under financial pressure and was now under pressure by virtue of the court order to execute the lease on the 26th of March. 6. The water damage issue Mr. Anderson sought to contend that these three new items were not conditions as such. However I do not accept that evidence. They were clearly stated to be conditions in the letter of 9th April, 2014; they were also clearly stated as conditions in the letter of 2nd July, 2014; Moreover they were pleaded as conditions in the defence and counterclaim. They were extra conditions added by the defendants to the court order of 5th March, 2014. They should not have been added. They formed no part of the agreement between the parties on 5th March, 2014 and they formed no part of the court order of 5th March, 2014. They were a clear attempt by the defendants to use the court order for their own commercial advantage. That is both inequitable and unconscionable. The court will not permit any party to obtain a court order, to seek to abuse that court order and then if that tactic backfires, to seek to enforce that very court order. That is clearly an abuse of process. 7. The refusal by the defendants to sign until Mr. Reynolds signed In my view, it was clear from the manner in which the first set of proceedings were prosecuted, and it is implicit in the settlement agreement and court order that it was at all times intended by the parties that the lessees would execute the lease first in accordance with normal conveyancing practice and that then Mr. Reynolds would execute by the 26th March, 2014. There is, in my view, absolutely no grounds for Mr. Anderson’s belief that the court order imposed a unilateral obligation on Mr. Reynolds but that the defendants were at large after the 26th March as to when they should sign. Indeed Mr. Anderson’s evidence in this respect is revealing because it shows that he had a belief that Mr. Reynolds had to sign by the 26th March but that the defendants did not have to do so, but could in fact use his signature as the bargaining tool in seeking to extract further concessions from him in respect of the condition of the building or the consent on the sky walk. Mr. Anderson gave evidence that, as far as he was concerned, when Mr. Reynolds had done everything he needed to do, and had executed the lease, the defendants would have executed the lease immediately and provided the requisite funds. When asked what precisely Mr. Reynolds had left to do, he indicated that Mr. Reynolds had to provide assurance that the receiver was consenting, that the bank was consenting, that the liquor licence was in place etc. I do not accept this evidence by Mr. Anderson. All these matters had been attended to, as Mr. Anderson’s solicitor knew full well. They were simply red herrings raised by Mr. Anderson to provide some fig leaf of justification for his failure to close on the due date. 8. The non acceptance of service of proceedings Moreover on 14th May the plaintiff issued a notice of motion returnable to 26th May, 2014 to have the matter admitted to the Commercial Court and expedited. Again this is all consistent with the plaintiff’s case that he was anxious at this time to have the defendants execute the agreement because he was under financial pressure to do so. 9. Motion seeking judgment in default of defence 10. The so called “plan B” 11. The exit of Mr. Dolan 12. The indemnity between the defendants and Mr. Dolan Introduction The necessity for new proceedings
139. This principle was also enunciated in O’Sullivan v. Weisz [2005] IEHC 74 where Finnegan J. (as he then was) stated as follows:
The defendants’ application for specific performance 142. It is well settled that specific performance is an equitable relief given by a court to compel a party to do that which he agreed to do by contract. It is a relief which is discretionary in nature. As is stated in Halsbury’s Laws of England (5th Ed., vol. 95, paras. 301 and 340)
“The grounds on which specific performance will be refused do not fall into rigid categories. There is a general jurisdiction to deny specific performance if the court, on the particular facts considers it just to do so.” 144. In the present case I have no doubt that it would be inequitable to grant an order for specific performance because the defendants’ conduct after 5th March, 2014 amounted to bad faith. They unilaterally postponed the closing date; they delayed the closing date; they prevaricated; they said that one of their guarantors was out of the country; they demanded engrossments of the lease when they had them in their possession at all times; they added entirely spurious new conditions which they accepted in evidence had been resolved in the first set of proceedings (e.g. the skywalk, the rear staircase and the water damage issue); they refused to close until these new conditions were agreed to by the plaintiff; they delayed in order to put pressure on the plaintiff whom they knew was in financial difficulties; they delayed knowing the plaintiff had withdrawn his planning objection and had therefore lost his main “negotiating card”; they refused to sign before the plaintiff signed when they knew that was entirely inappropriate; they forced the plaintiff to issue these proceedings because of their behaviour; they deliberately refused to accept service of these proceedings; they deliberately failed to comply with the direction of the court about filing their defence; they delayed in order to negotiate the exit of one of their members (Mr. Dolan) and allow Mr. Clinton to replace him; one of their number refused to sign the guarantee until early August, 2014 until he received an indemnity from the other parties; they routed the deposit monies through a murky and unexplained route; they filed misleading affidavits of discovery and a misleading witness statement; they concealed all their machinations about the exit of one member and the entry of another member from the plaintiff; they sent a copy of a signed lease dating from 2012 when they knew that that was irrelevant; they sent a copy of the signed lease despite the fact that one of the defendants’ own solicitors had stated that under no circumstance was this signed lease to be sent to the plaintiff’s solicitors. 145. It is clear from all of the above that the defendants adopted a deliberate strategy of delaying, obfuscating, obstructing, adding new conditions, playing for time, concealing from Mr. Reynolds what was going on behind the scenes, and seeking to wrest new concessions from Mr. Reynolds in his weakened condition. They carried on this strategy even after proceedings had been issued to force them to comply with the agreement and order of 5th March 2014. 146. I have no doubt that the defendants, led by Mr. Anderson, engaged in an entirely unscrupulous attempt to gain extra concessions from Mr. Reynolds realising, as they did, that he was in a weak financial position, that he had withdrawn his appeal from An Bord Pleanála, and that he was bound by a court order. This was all done deliberately by the defendants to try to force extra concessions out of Mr. Reynolds to contribute to the cost of the water damage when they had quite clearly agreed to take the property in the condition it was in as at 5th March, 2014. 147. I would therefore conclude that the actions of the defendants were unscrupulous and were acts of bad faith. The defendants were never ready willing or able to complete the transaction until early August, 2014 at the earliest. But even then, it is clear that the defendants’ agreement to execute the lease on or about 14th August, 2014 was conditional on a number of matters including the condition that the plaintiff would contribute to the water damage. These conditions were set out in the defendants’ counterclaim dated 30th June, 2014 and were maintained at all times by the defendants up to and including the trial of these proceedings. Thus it is clear that the defendants were not ready willing and able to complete the agreement on 26th March, 2014 as stipulated by the agreement and as directed by the court order. 148. I am also of the view that the defendants sought to use the existence of the court order for their own ends. They believed that Mr. Reynolds now had to sign to the lease not only because of the agreement but also because of the court order. Their actions subsequent to the court order of 5th March, 2014 were not only acts of bad faith, they were also an abuse of the court order and therefore an abuse of process. 149. In those circumstances therefore I refuse the reliefs of specific performance sought by the defendant. The reliefs sought by the plaintiff. 151. One of the reliefs he seeks is to set aside the agreement because of the misrepresentation of the defendants at the time the plaintiffs and the defendants entered into the agreement of 5th March, 2014. 152. However I do not believe that the issue of misrepresentation is relevant in this case. There are many elements which might persuade one or both or all parties to settle legal proceedings as the parties did in this case on 5th March, 2014 and I do not believe it is either possible or appropriate to single out specific reasons why the plaintiff or the defendants might have settled the earlier proceedings. 153. However the essential relief which is sought by the plaintiff is the setting aside or rescission of the agreement of 5th March, 2014 on the grounds that the defendants subsequently breached the essential condition of the contract (i.e. that it be executed on or before 26th March, 2014) and/or on the grounds of the defendants’ subsequent bad faith and/or conduct in relation to this transaction. 154. The defendants have maintained that the plaintiff is not entitled to the equitable remedy of rescission because he has not come to the court with clean hands. I do not accept this. The plaintiff has certainly made mistakes and in respect of some of his actions (particularly his text messages - about which there was a considerable amount of evidence) has made certain errors of judgment. He accepted that mistakes had been made. However, I do not believe that the errors or misjudgements on the part of the plaintiff are of such a magnitude as to disentitle him to the equitable relief of rescission. It is clear that he did his level best to get the defendants to execute the lease - even issuing these proceedings to force them to do so. 155. I do not accept at all the defendants’ characterisation that the plaintiff set out to wreck this deal. The evidence is entirely at odds with this. The evidence, when properly analysed, established that the plaintiff was at all times ready, willing and able to execute the lease, having agreed to do so on 5th March, 2014. The plaintiff withdrew the planning appeal from An Bord Pleanála as he had agreed to do. Moreover he instructed his solicitor at all times to take whatever steps were necessary to try and ensure that the agreement was executed on or before the 26th March, 2014 or, as soon as possible thereafter. He even instituted these proceedings to get the agreement executed. 156. It is true that the plaintiff continued to think about a plan B and raised issues about the guarantee with Mr. Dolan. But his concern for a plan B was understandable - if the defendants failed to execute - and his issues about the guarantee were in fact correct. But when one considers all of the plaintiff’s actions in the round - which include withdrawing his appeal, instructing his solicitors to press for execution and issuing proceedings to compel the defendants to execute the agreement, these are all consistent with the desire to execute the lease as soon as was feasible. 157. I do not believe, therefore, the plaintiff has not come to court with clean hands and I do not believe that he is not entitled to the equitable relief of rescission. 158. It is also clear in my view that where court proceedings - for specific performance of an agreement for lease - are compromised and the parties agree to execute a lease on or before a particular day, then the date on which the lease is to be executed is a condition of the contract. It is also, of course, a term of the court order. Insofar as the defendants made no bona fide attempt to execute the lease on that date and delayed it for several months to extract extra concessions to take advantage of a weakened plaintiff, their actions clearly constitute a significant breach of contract such as to entitle the plaintiff to regard the agreement as at an end. 159. Moreover insofar as the defendants’ actions are a breach of the court order the plaintiff is also entitled to a declaration that the defendants are in breach of the relevant court order. 160. Therefore I am of the view that the plaintiff is entitled to a declaration that the defendants are in breach of contract and in breach of a court order, damages for breach of contract and rescission of the agreement on the grounds of the defendants’ bad faith, unscrupulous behaviour and abuse of process. 161. I will hear the parties about the form of the order and any damages claim which might arise. |