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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Reynolds -v- Altomoravia Holdings Ltd & ors [2015] IEHC 552 (29 July 2015)
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Cite as: [2015] IEHC 552
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Judgment
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Neutral Citation: [2015] IEHC 552 THE HIGH COURT
COMMERCIAL [2014 No. 4010 P] BETWEEN JOHN REYNOLDS PLAINTIFF AND ALTOMORAVIA HOLDINGS LIMITED, THOMAS ANDERSON, IAN REDMOND, COLIN DOLAN AND MICHAEL ORMOND (No. 2)
DEFENDANTS JUDGMENT of Mr. Justice Cregan delivered on the 29th day of July, 2015 Introduction 1. On 30th June, 2015 I gave my first judgment in relation to the matters raised in these proceedings. I then adjourned the matter for a further hearing on any damages claim which might arise. The parties subsequently made submissions about the damages issue and this judgment deals with the issue of damages. 2. The plaintiff submits that he is entitled to damages under a number of different headings. In summary, the plaintiff claims the following as heads of damages:
2. Damages for arrears of rent from 20th September, 2012 to 27th March, 2014 - (in the sum of €595,000). 3. Damages for arrears of rent from 26th March, 2014 to 21st July, 2015 - (in the sum of €690,000). 4. Service charge payments - (in the sum of €10,597.79 approximately). 5. Insurance since 26th March, 2014 - (in the sum of €56,698.00 approximately). 6. Rates - (in the sum of €112,407.53 approximately). 3. In my first judgment I held for the plaintiff, and held that the defendants were not entitled to an order for specific performance of the said agreement/court order. I also held that the plaintiff was entitled to damages for breach of contract, a declaration that the defendants were in breach of contract and in breach of the court order and rescission of the agreement. 4. At para. 160 of my decision I stated:
6. However in my view, this argument is unsustainable for a number of reasons. 7. The first point to note is that the term “rescission” is often used in a number of different ways. This is best illustrated by the following statements of principle in The Law of Rescission (2nd ed., 2014, O’Sullivan et al) para. 1.01:
….. It is now accepted that it is the character of the event that confers the right to terminate which is of decisive importance in explaining the entitlement to termination ab initio and de futuro. In the case of termination ab initio there is a defect in the formation of the contract whereas termination de futuro involves a later defective performance or impossibility of performance. Hence it is said the contract in the former case can be undone from the start whereas in the latter it can only be truncated for the future.”
12. Lord Wilberforce stated:
First, in a contract for the sale of land, after time has been made, or has become, of the essence of the contract, if the purchaser fails to complete, the vendor can either treat the purchaser as having repudiated the contract, accept the repudiation, and proceed to claim damages for breach of the contract, both parties being discharged from further performance of the contract; or he may seek from the court an order for specific performance with damages for any loss arising from delay in performance. (Similar remedies are of course available to purchasers against vendors.) This is simply the ordinary law of contract applied to contracts capable of specific performance. Secondly, the vendor may proceed by action for the above remedies (viz. specific performance or damages) in the alternative. At the trial he will however have to elect which remedy to pursue. Thirdly, if the vendor treats the purchaser as having repudiated the contract and accepts the repudiation, he cannot thereafter seek specific performance. This follows from the fact that, the purchaser having repudiated the contract and his repudiation having been accepted, both parties are discharged from further performance. At this point it is important to dissipate a fertile source of confusion and to make clear that although the vendor is sometimes referred to in the above situation as "rescinding" the contract, this so-called "rescission" is quite different from rescission ab initio, such as may arise for example in cases of mistake, fraud or lack of consent. In those cases, the contract is treated in law as never having come into existence. (Cases of a contractual right to rescind may fall under this principle but are not relevant to the present discussion.) In the case of an accepted repudiatory breach the contract has come into existence but has been put an end to or discharged. Whatever contrary indications may be disinterred from old authorities, it is now quite clear, under the general law of contract, that acceptance of a repudiatory breach does not bring about "rescission ab initio." I need only quote one passage to establish these propositions. In Heyman v. Darwins Ltd. [1942] A.C. 356 Lord Porter said, at p. 399: "To say that the contract is rescinded or has come to an end or has ceased to exist may in individual cases convey the truth with sufficient accuracy, but the fuller expression that the injured party is thereby absolved from future performance of his obligations under the contract is a more exact description of the position. Strictly speaking, to say that on acceptance of the renunciation of a contract the contract is rescinded is incorrect. In such a case the injured party may accept the renunciation as a breach going to the root of the whole of the consideration. By that acceptance he is discharged from further performance and may bring an action for damages, but the contract itself is not rescinded." See also Boston Deep Sea Fishing and Ice Co. v. Ansell (1888) 39 ChD 339 , 365, per Bowen L.J.; Mayson v. Clouet [1924] AC 980 , 985, per Lord Dunedin and Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331 , 345, per Lord Reid, 350, per Lord Diplock. I can see no reason, and no logical reason has ever been given, why any different result should follow as regards contracts for the sale of land, but a doctrine to this effect has infiltrated into that part of the law with unfortunate results. I shall return to this point when considering Henty v. Schroder (1879) 12 ChD 666 and cases which have followed it down to Barber v. Wolfe [1945] Ch. 187 and Horsler v. Zorro [1975] Ch. 302 . Fourthly, if an order for specific performance is sought and is made, the contract remains in effect and is not merged in the judgment for specific performance. This is clear law, best illustrated by the judgment of Sir Wilfrid Greene M.R. in Austins of East Ham Ltd. v. Macey [1941] Ch. 338 , 341 in a passage which deals both with this point and with that next following. It repays quotation in full. "The contract is still there. Until it is got rid of, it remains as a blot on the title, and the position of the vendor, where the purchaser has made default, is that he is entitled, not to annul the contract by the aid of the court, but to obtain the normal remedy of a party to a contract which the other party has repudiated. He cannot, in the circumstances, treat it as repudiated except by order of the court and the effect of obtaining such an order is that the contract, which until then existed, is brought to an end. The real position, in my judgment, is that so far from proceeding to the enforcement of an order for specific performance, the vendor, in such circumstances is choosing a remedy which is alternative to the remedy of proceeding under the order for specific performance. He could attempt to enforce that order and could levy an execution which might prove completely fruitless. Instead of doing that, he elects to ask the court to put an end to the contract, and that is an alternative to an order for enforcing specific performance." Fifthly, if the order for specific performance is not complied with by the purchaser, the vendor may either apply to the court for enforcement of the order, or may apply to the court to dissolve the order and ask the court to put an end to the contract. This proposition is as stated in Austins of East Ham Ltd. v. Macey [1941] Ch. 338 (and see Singh (Sudagar) v. Nazeer [1979] Ch. 474 , 480, per Megarry V.-C.) and is in my opinion undoubted law, both on principle and authority. It follows, indeed, automatically from the facts that the contract remains in force after the order for specific performance and that the purchaser has committed a breach of it of a repudiatory character which he has not remedied, or as Megarry V.-C. puts it [1979] Ch. 474 , 480, 790, that he is refusing to complete. These propositions being, as I think they are, uncontrovertible, there only remains the question whether, if the vendor takes the latter course, i.e., of applying to the court to put an end to the contract, he is entitled to recover damages for breach of the contract. On principle one may ask "Why ever not?" If, as is clear, the vendor is entitled, after, and notwithstanding that an order for specific performance has been made, if the purchaser still does not complete the contract, to ask the court to permit him to accept the purchaser's repudiation and to declare the contract to be terminated, why, if the court accedes to this, should there not follow the ordinary consequences, undoubted under the general law of contract, that on such acceptance and termination the vendor may recover damages for breach of contract?” (Emphasis added).
"When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected. When a contract is rescinded because of matters which affect its formation, as in the case of fraud, the parties are to be rehabilitated and restored, so far as may be, to the position they occupied before the contract was made. But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its root, the contract is determined so far as it is executory only and the party in default is liable for damages for its breach."
In particular Barber v. Wolfe [1945] Ch. 187 and Horsler v. Zorro [1975] Ch. 302 cannot stand so far as they are based on the theory of "rescission ab initio" which has no application to the termination of a contract on accepted repudiation.” (Emphasis added). 17. There is another consideration on the facts of this case. In this case the agreement was, in fact, made an order of the court. Thus, the effect of an order of rescission ab initio would, in effect, be to also set aside the court order of 5th March, 2014. In my view it is not necessary to do this. The order of the court still stands. It records the agreement between the parties entered into on 5th March, 2014. The plaintiff has operated this contract; the defendant has breached the contract. Therefore the plaintiff is entitled to damages for breach of that contract and a declaration that, as at the date of judgment, the contract has come to an end by virtue of the defendants’ conduct. In my view this is the appropriate order to make in this case. Damages for abuse of process 18. Even if I were wrong on any of the above analysis, it is clear that the plaintiff also has a right to damages in tort. 19. As is stated in The Law of Rescission (2nd ed., 2014, O’ Sullivan et al.):
21. These acts of abuse of process had the effect that the plaintiff was unable to obtain rents, rates or service charges from the defendants, from the date on which the lease should have been completed, until the date of judgment. In those circumstances, the actions of the defendant caused losses to the plaintiff which were entirely foreseeable (i.e. the loss of rents, rates and service charges on the building) whilst they engaged in their acts of abuse of process. 22. In those circumstances therefore, the plaintiff is entitled, in the alternative, to damages for abuse of process, which damage has been caused directly by the actions of the defendants. The measure of that loss and damage is set out later in my judgment. Elements of the loss claimed by the plaintiff (i) Whether the plaintiff is entitled to damages for any losses which he suffered before 5th March, 2014 23. In the first set of proceedings, the defendants in these proceedings issued proceedings, as plaintiffs, against Mr. Reynolds (as defendant) seeking specific performance of the agreement for lease dated 20th September, 2012. These proceedings were compromised by agreement between the parties and were made an order of the court. The within proceedings started when Mr Reynolds issued proceedings against the defendants, seeking specific performance of the agreement of 5th March 2014, damages for breach of that contract or, in the alternative, rescission of the contract and damages. 24. The defendants filed a full defence and also claimed specific performance of this agreement of 5th March, 2014. 25. Therefore the issue at all times in this case was the agreement entered into between the parties on 5th March, 2014 which was also made the subject of a court order. 26. In those circumstances therefore, I do not believe that it would be correct as a matter of principle, or as a matter of law, to consider any damages which the plaintiff may have suffered, before the agreement of 5th March, 2014. Even if the plaintiff had suffered any damage in respect of the period before 5th March, 2014, any such claim was, in effect, compromised by virtue of the agreement he entered into on 5th March, 2014. 27. In those circumstances, I would disallow any claim which the plaintiff is seeking to make for any damages which he may have suffered prior to 5th March, 2014. (ii) The Security Deposit 28. The plaintiff claims the sum of €185,000 as damages for the security deposit. However, the defendants submitted that the security deposit, which was to be paid by the defendant, would of course have been refundable at the end of the lease. Given that the plaintiff is entitled to a declaration for damages for breach of contract, the defendants submit that the security deposit could not form part of the damages claim. I agree with this submission. A plaintiff cannot seek, as a head of damages, the loss of a security deposit when that deposit would have to be refunded to the lessee in due course. (iii) The Rent Free Period 29. I also note that the plaintiff has claimed damages for the full arrears of rent from March, 2014 to the date of judgment - even though part of the agreement agreed between the parties, was that the defendants would have an eighteen and a half week rent free period. In my view, the plaintiff is not entitled to receive a figure reflecting the rent due for that eighteen and a half week period, when no rent was due under the contract. If a court were to order such damages then that would be an unexpected and unjustifiable windfall for the plaintiff. (iv) Rent, Rates, Service Charge and Insurance 30. However the plaintiff is entitled to a damages figure which reflects the loss of rent which he suffered by virtue of the defendants’ failure to complete the contract from 26th March, 2014 until 21st July, 2015 (excluding the eighteen and a half week rent free period). 31. Likewise the plaintiff is entitled to a sum representing a sum equivalent to the service charge payable on the premises from 26th March, 2014 until 21st July, 2015. 32. I am also of the view that the plaintiff is entitled to recover a figure equivalent to the relevant insurance and rates which were paid, or payable from, 26th March, 2014 until 21st July, 2015. Conclusion 33. I would therefore conclude that the plaintiff is entitled to damages for breach of contract for the above amounts.
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