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You are here: BAILII >> Databases >> Supreme Court of Ireland Decisions >> Supermac's Ireland Ltd. v. Katesan (Naas) Ltd. [2000] IESC 17 (7 June 2000)
URL: http://www.bailii.org/ie/cases/IESC/2000/17.html
Cite as: [2000] IESC 17, [2001] 1 ILRM 145
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THE SUPREME COURT
1998/No. 6243P
155/99
Denham J.
Hardiman J.
Geoghegan J.
Between:
SUPERMACS IRELAND LIMITED
and
PATRICK McDONAGH
Plaintiffs
and
KATESAN (NAAS) LIMITED
and
PATRICK SWEENEY
Defendants
[Judgments delivered by Geoghegan J. and Hardiman J., Denham J. agreed with Geoghegan J. and Hardiman J.]
JUDGMENT of Mr. Justice Geoghegan delivered the 7th day of June, 2000.1. This appeal arises out of a specific performance suit commenced in the High Court on the 22nd May, 1998. The Plaintiffs alleged that they entered into an agreement in November 1997 whereby they purchased several different premises from the Defendants for £4 m. The sales in respect of five of the six premises concerned have been completed and the dispute concerns the sixth. The statement of claim was delivered on the 25th November, 1998 but on the 10th October, 1998 a motion was brought by the Defendants to be heard on the 30th November, 1998 for an order dismissing the Plaintiffs' claim on the grounds that it was unsustainable and amounted to an abuse of the process of the court. The motion also sought the vacating of a lis pendens. For the reasons set out in a written judgment delivered on the 15th March, 1999 Macken J. refused the motion. The Defendants have appealed that refusal to this court. 2. I should explain at the outset that the Defendants concede that they would not be entitled to an order under Order 19, Rule 28 of the Rules of the Superior Courts. They admit that if they are entitled to the order which they seek it can only be made under the inherent jurisdiction of the court. The Defendants were bound to make this concession having regard to the fact that the statement of claim on its face clearly shows a cause of action and there is nothing to suggest that there is anything frivolous or vexatious about the proceedings. The Defendants therefore must invoke the inherent jurisdiction so that they can rely on affidavit evidence which they do. 3. On the hearing of the appeal there was no dispute between the parties as to the legal principles to be applied to the inherent jurisdiction to strike out proceedings. A large number of cases, starting with Barry v. Buckley [1981] IR 306 were presented to the court in a Book of Cases but they were not really opened to any extent. However I think it important to refer briefly to the latest of those cases Jodifern Limited v. Fitzgerald and in particular to the judgment of the Supreme Court delivered by Barron J. on the 21st December, 1999. In the fourth page of his judgment Barron J. says the following:-
"Every case depends upon its own facts. For this reason, the nature of the evidence which should be considered upon the hearing of an application to strike out a claim is not really capable of definition.
One thing is clear, disputed oral evidence of fact cannot be relied upon by a defendant to succeed in such an application. Again, while documentary evidence may well be sufficient for a defendant's purpose, it may well not be if the proper construction of the documentary evidence is disputed. If the plaintiff's claim is based upon allegations of fact which will have to be established at an oral hearing, it is hard to see how such a claim can be treated as being an abuse of the process of the court. It can only be contested by oral evidence to show that the facts cannot possibly be true. This however would involve trial of that particular factual issue.
4. Although the issue in that case seems to have been abuse of the process of the court the same principles would equally apply to an issue as to whether there was or was not a reasonable cause of action. It will be important to bear these dicta of Barron J. in mind when applying the legal principles to this case. 5. At the hearing of the appeal before this court, counsel for the Appellant Mr. Cush argued that the Plaintiff could not succeed in the action in that in relation to the sixth property, the subject of the action, there was allegedly never a concluded agreement or alternatively that if there was, there was no note or memorandum thereof sufficient to satisfy the Statue of Frauds. He further argued that the Plaintiff could not succeed on the basis of part performance both because there was no concluded agreement in the first instance and because such agreement as there was in relation to the particular property in question had not been partly performed. 6. Although Mr. Cush opened the case on the basis that there was no concluded agreement because there had been no agreement on the deposit and the amount thereof, no agreement on a completion date and no agreement concerning the possession of the Naas property, there being at the time potential problems about possession, he more or less conceded ultimately that for the purposes of this motion at least the absence of agreement on the deposit was the only factor, but a very important factor, on which he could rely. Obviously at the hearing of the action there could be argument as to whether there might have been an implied term that the sale would be completed within a reasonable time or some other kind of implied term relating to completion date. In relation to the question of possession it might be argued at the full hearing, that in the absence of any mention of this, there would be an obligation to give up clear vacant possession. The deposit however was quite a different matter. Mr. Cush argues that if on any view of the facts as they are before the court at this stage it must have been intended that there would be a deposit, the absence of any agreement as to the amount of it must necessarily mean that there was no concluded agreement. If there was no concluded agreement then the question of the sufficiency of a note or memorandum does not arise and ipso facto the question of part performance does not arise either. In his submissions regarding the deposit counsel for the Appellant principally relies on the decision of this court in Boyle v. Lee [1992] 1 IR 555. That case related to a sale of a house and the issues which fell to be determined was whether there was a concluded oral agreement and if so whether there was a sufficient note or memorandum of it to satisfy the Statute of Frauds. It was common case that there had been no specific agreement in relation to tenancies to which the property was subject or as to a closing date or as to the deposit. Separate judgments were delivered by Finlay C.J., McCarthy J., O'Flaherty J. and Egan J. The fifth member of the court Hederman J. agreed with the judgment of Finlay C.J. Effectively Finlay C.J., Hederman J. and O'Flaherty J. held that there was no concluded agreement but McCarthy J. and Egan J. dissented. It would appear that McCarthy J. and Egan J. took the view that it would be wrong to assume that the parties considered it essential to agree on a deposit and if they had agreed on the other main terms as they had there was no reason to hold that a final agreement had not been reached. This however was the minority view. As to what exactly the majority view was has never been entirely clear. The judgments of Finlay C.J. and O'Flaherty J. have been open to different interpretations and the problems arising out of them have been discussed by the learned author of Farrell on the Irish Law of Specific Performance. The different arguments of interpretation were recently presented before me as a High Court judge in Shirley Engineering Limited v. Irish Telecommunications Investments plc. I had considerable difficulties with them as is clear from my unreported judgment delivered on the 2nd December, 1999. It is in relation to the question of the deposit that the problems mainly arise. The learned High Court judge in that case Barrington J. had held that the failure of the parties to reach any agreement on the question of a deposit was irrelevant since it was of no importance in the contract. The former Chief Justice when commenting on that finding, described it as a mixed finding of law and fact, and he then went on to say the following:-Where the plaintiff's claim is based upon a document as in the present case then clearly the document should be before the court upon an application of this nature. If that document clearly does not establish the case being made by the plaintiff then a defendant may well succeed. On the other hand, if it does, it is hard to see how a defendant can dispute this prima facie construction of the document without calling evidence and having a trial of that question."
7. It is important to subject that passage to some analysis. First of all in holding that there had to be agreement on the deposit the former Chief Justice was dealing only with the question whether there was a concluded agreement and not in any way with the question of whether there was a sufficient note or memorandum to satisfy the Statute of Frauds. The passage therefore has no bearing on any question as to whether if a deposit is agreed the amount of it should be set out in the note or memorandum. Secondly, it is quite clear from the passage that Finlay C.J. was holding beyond doubt on the evidence that the amount of the deposit was still to be negotiated. If that was so that was clearly the end of the matter because if a term of an agreement has still to be negotiated how can it be said that there is a concluded agreement? When read in that light the passage in the judgment is crystal clear. Confusion has arisen because of references both in the case law and in the text books to expressions such as "material terms" or similar words in relation to the issue of whether there is a concluded agreement. That type of wording should have no place in that consideration. It is a wholly different matter when one comes to consider the sufficiency of a note or memorandum. Only the "material terms" need be included in a note or memorandum for it to be sufficient but all the terms, whether they be important or unimportant, must be agreed before there can be said to be a concluded agreement. It follows therefore that if the evidence is that there is going to be a deposit but that the amount of it is still to be negotiated, there cannot be a concluded agreement. The third point which arises from the passage cited relates to the words "even if a purchaser is willing to make a deposit of the appropriate amount, or the usual amount then experienced in transactions in Dublin." Some interpret these words as meaning that there can never be an implied agreement as to the deposit. I cannot agree with that view. What the former Chief Justice is saying is that the mere fact that the purchaser was willing to make an appropriate deposit could not render the agreement a concluded agreement if the understanding was that the deposit was to be negotiated. If the evidence establishes that two proposed parties to an agreement intended that their agreement should contain an express term relating to a deposit there cannot then be an implied term. Finlay C.J. is merely pointing out that a unilateral willingness on the part of the purchaser to pay a reasonable deposit is irrelevant in the absence of an agreement by the other party to accept that amount. 8. It is now necessary to consider what O'Flaherty J. had to say on this matter. Unlike this case there had been a "subject to contract" issue in Boyle v. Lee and a propos of that phrase O'Flaherty J. said the following:-"In my view, this finding was in error. The amount of a deposit to be made, even if a purchaser is willing to make a deposit of the appropriate amount, or the usual amount then experienced in transactions in Dublin, is too important a part of a contract for the sale of land in the large sum of £90,000 to be omitted from a concluded and complete oral agreement unless the parties in such an agreement had agreed that no deposit would be paid. In this case the evidence irresistibly leads to the conclusion that both the first plaintiff and Mr. McManus agreed that there had to be a deposit, but left it over to be agreed between the solicitors when the formal contract was being settled as to its amount and form. In my view, that evidence, which was not in contest, must lead to a conclusion that there was not a complete contract made orally between the first plaintiff and Mr. McManus before the 8th July, 1988."
9. It is clear from this passage that the evidence in the case must have been that Mr. McManus as agent for the vendor had expressly declined to take a deposit on the basis that the deposit question was to be left to be put into the formal contract. There might be situations where that would not necessarily mean that there was not a concluded agreement as, for instance, where each side simply trusted the other to submit to reasonable arrangements which the solicitors might include in the contract relating to deposit and other matters etc. But it is obvious that on the transcript of evidence in Boyle v. Lee both Finlay C.J. and O'Flaherty J. accepted that the question of the deposit was still to be negotiated and that it was intended to be a term of the agreement. In my view Finlay's C.J. reference to the importance of a deposit in such a transaction was simply a comment on credibility. He was taking the view that once the deposit was still to be negotiated that meant there was an actual term of the contract still to be negotiated and therefore there was no concluded contract. The views of O'Flaherty J., although expressed differently are not dissimilar. 10. Before considering the application of those principles to this case I think it appropriate briefly to review some other relevant authorities. In an unreported judgment of this court delivered on the 8th May, 1975 in Lynch v. O'Meara Henchy J. (with whom O'Higgins C.J. and Walsh J. concurred) had this to say:-"Before examining this phrase at all, it is necessary to go to back to the rudiments of the law of contract and find out whether there was an offer and acceptance and an intention to create legal relations. That there was an agreement on price, offer and acceptance, there is no doubt. But beyond that, in my judgment, there was much to be sorted out. For a start, the matter of the tenancies was not resolved. It was easy for the first plaintiff to say at the trial that he was prepared to take the property subject to the tenancies whatever kind they were - but one of his answers suggested that he might have had to engage in litigation because of what he felt was a misrepresentation in relation to a tenant who had in effect, a six year tenancy. It is common case that Mr. McManus left him under the impression that they were all short tenancies, meaning thereby not more than year. Then, there was no closing date agreed. Mr. McManus expressly declined to take a deposit believing that that was a matter proper to be put into the formal contract. So, it appears to me, that there was no consensus ad idem. There was, at the most, an agreement to agree."
"In this court, counsel for the plaintiff contended that the first document and the second document should be read together and as such should be held to constitute the note or memorandum required by the Statute of Frauds. However, before one comes to the question of a note or memorandum it is necessary to see if an entire contract was concluded on Sunday 24th October, for it is only in that event that the statutory note or memorandum would be required. If the negotiations between the parties had not ripened into the fullness of an entire contract the plaintiff's claim for specific performance would fail, not for want of the statutory evidence necessary for the enforcement of a contract for the sale of lands, but simply in default of the existence of any such contract. There would be no contract to be specifically enforced."
I merely quote that passage because of its clarity as to the correct approach. There cannot be a concluded agreement unless everything intended to be covered by the agreement has been either expressly or impliedly agreed.11. Black v. Kavanagh 108 ILTR 91 would seem to be an example of a case where on the evidence the judge (Gannon J.) took the view that the parties intended to reach a concluded agreement without dealing with the question of a deposit. It seems clear from the following passage in the judgment:
12. In this respect it is clear that the evidence in Black v. Kavanagh as to the status of the deposit was quite different from the evidence in Boyle v. Lee. 13. In Barrett v. Costelloe unreported judgment of Kenny J. dated the 13th July, 1973 (but noted in [1973] 107 ILT 239) the plaintiff told his agent that he was prepared to pay £40,000 and auctioneers fees in relation to a particular property but had stipulated that there was a deposit of 10%. The agent spoke to the vendor and told him of the offer but omitted to mention the stipulation about the deposit of 10%. The Defendant approved the sale and although it had not been mentioned to him he would have agreed to the 10% deposit had it been mentioned. On the particular facts of the case and the evidence as to how the negotiations ran Kenny J. held that there was an oral concluded agreement without any express term relating to the deposit. But he went on to observe as follows:-"I am satisfied on the evidence that the plaintiff and the defendant entered into a firm agreement for the sale and purchase of the defendant's house at No. 1 Dodder Park Grove Rathfarnham and the specific contents identified by them before they went to their respective solicitors about the matter. At that stage each of them believed that he had entered into a binding agreement which he expected and intended would be legally enforceable by or against subject only to an obligation to facilitate the other reasonably as to when possession would be given and received. I find that neither of them attached any importance to the matter of the payment of a deposit or as to its amount. On the evidence before me I am satisfied that neither of them gave any authority to his solicitor to enter into or negotiate the terms of a contract in any way at variance with the agreement they had already reached and that on the unconcluded matter of the date of possession their final agreement would be communicated but not decided by their solicitors. Both of them recognised and accepted that legal formalities which to them were no more than formalities were necessary and that the procedures of such nature would be followed on their behalf by the named solicitors, and no further authority was given to either solicitor. They relied on their solicitors to prepare any documents necessary to give legal force and effect to their agreement and each was willing and expected to put his hand to whatever documents his solicitor required for that purpose whether it be called the contract, or a draft contract, or a memorandum of agreement."
14. While it is not entirely clear, I think that Kenny J. was effectively holding that there was an implied term as to a deposit of 10% rather than that there was no agreement of any kind relating to deposit. But it does not much matter because if Kenny J. was holding that there was neither an express nor an implied term as to the deposit then effectively he was holding that there was a concluded agreement with both parties ignoring the question of a deposit and leaving it as something to be dealt with ultimately when the formal contracts were drawn up. In such a situation however if for some reason or other the solicitors drawing up the contract were unable to agree on a deposit, the original oral agreement would remain binding and there would be no contractual deposit. The underlying legal principle was referred to by Lavery J. in his dissenting judgment in Godley v. Power (1957) 95 ILTR 135 at 147 where he quotes with approval what he described as "the oft quoted and oft approved" passage from the judgment of Parker J. in Van Hatzfeldt Wildenberg v. Alexander [1912] 1 Ch 284 at p.288. The passage reads as follows:-"In former times a deposit of 25% was usual but the evidence satisfies me that a deposit of 10% has become a common practice in property sales in Dublin. I do not accept the submission of the defendant's counsel that there was never a concluded contract between the parties."
"It appears to be well settled by the authorities that if the documents
15. Applying the above principles as enunciated in the case law to this particular case, it would seem that if this action goes to trial there may be a number of alternative arguments relating to the question of the deposit. I would list these as follows:-or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain, or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored."
(1) That it was always intended that the parties would be contractually bound by a particular deposit yet to be negotiated.
(2) That having regard to the nature of the transaction in this case and in particular the fact that there was a franchisor - franchisee relationship between the parties, it was not intended that there be a deposit.
(3) That in all the circumstances of the case there would have been an implied term that a reasonable deposit would be paid.
(4) That in all the circumstances there was an implied term that the standard deposit normally payable in transactions of this kind would be paid.
16. If the trial judge held in favour of the first of those arguments the action would undoubtedly have to be dismissed because there would then have been no concluded agreement. But the action would not have to be dismissed if any of the remaining four arguments held good. At this stage of the proceedings it would be wrong and indeed it would not be possible for this court to hold that only the first argument was open. There can be no question therefore in my view of the proceedings being struck out at this stage on the basis that there was no concluded agreement as to deposits. 17. Still less could this court hold at this stage that there was no concluded agreement because of there being no reference to a completion date. In many sets of circumstances the court implies a term that the agreement will be completed within a reasonable time. The evidence in this case suggests that a speedy completion date was desired but it was known to both parties that there were problems of vacant possession in relation to the actual property the subject matter of this action and at this stage it could not be said with certainty that there was not an implied term as to completion. 18. Nor is the absence of any stipulation about vacant possession in relation to the property the subject matter of the action fatal to the Plaintiffs' claim. On the contrary the general rule would be that in the absence of any such stipulation an obligation to give vacant possession must be presumed. 19. I now turn to the next of the Defendants' arguments. The Defendants maintain that, if contrary to what they submit there may arguably have been a concluded agreement, there is no note or memorandum of such agreement which could arguably satisfy the Statute of Frauds. To explain this part of the argument it is necessary to go into the facts of the case in more detail. 20. The second-named Plaintiff through the vehicle of the first-named Plaintiff, a company which he controlled operated a restaurant franchise business. The Defendants became franchisees of the Plaintiffs in respect of premises at Loughrea, Roscrea, Tullamore, Thurles and Kilkenny and under separate franchise agreements carried on restaurants in these premises under the Supermac name. This arrangement continued satisfactorily for some years until differences arose. The second-named Defendant purchased the well known roadside restaurant "Mother Hubbard's" at Moyvally, Co. Meath. The Plaintiffs considered that this was a breach of the franchise agreement insofar as the second-named Defendant was devoting time in what was in effect a rival business. At some stage in 1996, the second-named Defendant purchased premises in South Main Street, Naas and requested a franchise to operate the premises as a Supermac's restaurant. But because of what the Plaintiffs perceived as breaches of the franchise agreements, such new franchise was refused. There would seem to have been fairly acrimonious discussions and negotiations between the parties and in an attempt to arrive at a settlement it was suggested that the Plaintiffs would buy out all the premises including the new premises in Naas. In order to try and arrive at an overall agreement the second-named Defendant with the approval of the second-named Plaintiff arranged for a former bank manager and a professional mediator, Mr. Michael Chambers, to act as mediator in the negotiations between the Plaintiffs and the Defendants. Following on correspondence between the respective solicitors with letters containing the usual denial of a contract, a number of meetings were arranged between Mr. McDonagh, Mr. Sweeney and Mr. Chambers. These eventually gave rise to a document being drawn by Mr. Chambers at a meeting on the 7th November, 1997 and headed "Paddy Sweeney and Pat McDonagh Headings of Agreement". The document then read as follows:-(5) That it would never have occurred to any of the parties that there would be a problem about the deposit and that a concluded agreement was reached ignoring it with the assumption that the solicitors when drawing up formal contracts would agree a deposit.
7th November, 1997.
Agreement.
Paddy has agreed to sell his freehold premises at Roscrea, Co./ Tipperary, Thurles, Co. Tipperary, Loughrea, Co. Galway, and Naas, Co. Kildare together his leasehold premises at Tullamore, Co. Offaly and Kilkenny, Co. Kilkenny, to Pat McDonagh.
Consideration:
Property only £1,940,000,
Leasing £70,000,
Equipment all as itemised £300,000,
Good will relating to business created £1,390,000,
Consultant's fee to be paid to Paddy Sweeney/Katesan Limited to ensure smooth transfer of the business £300,000.
Katesan Limited:
Paddy; Michelle; Gerry; and Yvonne to continue to be involved in the existing locations for as long as it takes to effect a smooth transition of the business.
Franchises:
All franchises in place or otherwise between Paddy Sweeney/Katesan Limited and Supermac's/Pat McDonagh will cease on completion of closure of Sale Contracts.
Insurances:
Paddy Sweeney to be responsible for all claims and premiums under insurance up to and including the closure of Sale Contracts. Pat McDonagh to take over existing policies subject to being satisfied to their cover etc.
Litigation:
Paddy Sweeney to be responsible for all or any claims in existence or instituted against the company up to and including the close of Sale Contracts.
Equipment:
All equipment already in each premises and listed on the attached schedules, agreed price £300,000.
Leased equipment:
Paddy to undertake to clear existing leases on payment from Pat, rather than
raise new leases etc.
Staff:
Paddy to supply Pat with all existing Staff Files; list of all Staff + Wages + any cash element all Holiday/Holiday pay to be paid by way of cheque to Pat.
Stock:
Stock-take to be arranged on the close of business on the night before close of Sale Contracts, Paddy and Pat to liaise on this. Stock together with franchise fees and any other outstanding accruals.. Heat, light, Phone etc. to be then balanced out and settled within one month of close of Sale Contracts.
Services:
All services to be transferred over to Pat McDonagh by arrangement on close of Sale Contracts e.g. ESB; Rentokil; Phone; Refuse collection; Laundry etc. Paddy to ensure a smooth transfer
Alarms:
All alarm codes. Service Agreements, related Files, together with all keys to Safes, Premises and spare keys to be handed over to Pat at close of Sale Contract.
This is a note of the points agreed by Pat and Paddy. The agreement has been reached with mutual respect and regard, to help with the smooth transfer of the property and business and to expedite the completion of the Sale Contract.
Signed:
Pat McDonagh; Rafford, Kiltulla, Co. Galway.
Paddy Sweeney; Main Street, Loughrea, Co. Galway.
21. The only signature actually appended to the document was that of Michael Chambers. Although there was a place for Pat McDonagh and Paddy Sweeney to sign they did not in fact sign. It is to be noted that all the figures add up to £4 m. It is on that basis that a single composite agreement for sale at £4 m. is pleaded in the statement of claim. The above quoted document became amended later to apportion the price differently and particularly to apportion the prices of the different properties. It will therefore be strongly argued at the hearing that there was never a binding contract for £4 m. but rather a number of different contracts which only came into being when formal law society agreements were signed. No such agreement was ever signed in relation to the Naas property. Before I move to deal with the amended document I would comment in passing on the number of references in the document of 7th November, 1997 to "Sale Contracts." However I do not think that this has any particular significance in either advancing or defeating the Defendants case and certainly at this stage it could not be argued that beyond doubt there was never intended to be a concluded composite agreement. The amended document was drawn up at a meeting on the 13th November, 1997 and I think it important to set it out in full also. It had the same heading "Paddy Sweeney and Pat McDonagh Headings of Agreement" but the first page of it was dated 13th November, 1997 instead of 7th November, 1997. There were then a number of headings which read as follows:-Michael Chambers; Cleveragh House, Loughrea, Co. Galway."
"Agreement:
Total sale price £4,000.000 (four million pounds Irl.).
Paddy has agreed to sell as follows; Roscrea £600K; Loughrea £600K;
Thurles £855K; Tullamore £200K; Kilkenny £250K; Naas £370K. This is regarding the property only.
Consideration:
Property only £2,875,000
Equipment all as itemised £475K. including £70K of Leasing.
Goodwill relating to business created £250K.
Consultants fee to be paid to Paddy Sweeney/Katesan Limited to ensure
smooth transfer of the business £400K up front, but to cover a period of 2 years.
Katesan Limited:
Paddy; Michelle; Gerry; and Yvonne to continue to be involved in the existing locations for as long as it takes to effect a smooth transition of the business but the period not to exceed two years.
Franchises:
All franchises between Paddy Sweeney/Katesan Limited and Supermac's/Pat McDonagh will cease on completion of closure of Sale Contracts.
Insurances:
Paddy Sweeney to be responsible for all claims and premiums under insurance up to and including the closure of Sale Contracts. Pat McDonagh to take over existing policies subject to being satisfied to their cover etc.
Litigation:
Paddy Sweeney to be responsible for all claims in existence or instituted against the company up to and including the close of Sale Contract.
Equipment:
All equipment already in each premises and listed on the attached schedules, agreed price £475K;
Leased equipment; Paddy to undertake to clear existing leases on payment from Pat, rather than raise new leases etc. the sum due to settle with the stock/fees/accruals etc.
Staff:
Paddy to supply Pat with all existing; list of all Staff + Wages + any cash element; Staff Files; Holiday Lists etc.; Paddy to pay Pat re Holidays due.
Stock:
Stock take to be arranged on the close of business on the night before close of Sale Contract, Paddy and Pat to liaise on this. Stock together with franchise fees and any outstanding accruals - Heat, light, Phone etc. to be then balanced out and settled.
Services:
All services to be transferred over to Pat McDonagh by arrangement on close of Sale Contracts e.g. ESB; Phone; Refuse collection; Laundry; Pest Control etc. Paddy to ensure smooth transfer.
Alarms:
All alarm codes. Service Agreements, related Files, together with all keys to Safes, Premises and spare keys to be handed over to Pat at close of Sale Contract.
This is a note of the points agreed by Pat and Paddy. The agreement has been reached with mutual respect and regard, to help with the smooth transfer of the property and business, and to expedite the completion of the Sale Contract. It is also being stated at each and every meeting the absolute need for confidentiality, especially taking into account the position re Staff.
Signed:
Pat McDonagh, Rafford, Kiltulla, Co. Galway,
Paddy Sweeney, Main Street, Loughrea, Co. Galway,
22. None of the intended signatories actually signed that particular document. I should have mentioned that the second page of the document of the 13th November, 1997 is in fact headed 7th November, 1997 and is almost though not quite a straight copy of the second page of the document of the 7th November, 1997. This second page commences with the heading "Staff". 23. It would be immediately apparent to any lawyer that all kinds of problems could arise from any attempt to set up either or both of these documents as a memorandum for the purposes of the Statute of Frauds. There is first of all the point that Mr. Chambers signed the first document but not the second and that nobody signed the second. If the action goes to trial the Defendants will be strongly arguing that Mr. Chambers was never an agent of the Defendants for the purposes of signing any memorandum. However their counsel Mr. Cush fairly concedes that there is an issue to be tried on that point and he could not succeed in having the action struck out on that basis at this stage. He does however strongly rely on the absence of any signature on the second document. In my view, it would not be correct for this court to strike out the proceedings at this stage on that account. There has been a good deal of development of the case law relating to memoranda to satisfy the Statute of Frauds and as to when and where signatures have to be appended and as to the connection to be made between one document and another. These various cases have been considered by the learned author of Farrell on Irish Law of Specific Performance. It would not seem to me that beyond doubt the Plaintiffs could not rely on the first document or the first document combined with the second as a sufficient memorandum. It is a matter which should be argued out and tried at the action. Nor do I consider that either because of the reference to "Sale Contracts" in each of the documents or the apportionment of price between the different properties as set out in the second document that the Plaintiffs could never succeed in establishing the first document or the first document combined with the second as a sufficient memorandum of the contract alleged in the statement of claim that is to say the composite contract for £4 m. 24. If, notwithstanding the absence of any express reference to a deposit the court should ultimately hold that there was a concluded agreement the absence of any reference to the deposit in the alleged note or memorandum would not necessarily be fatal. If there was an implied term as to the deposit it is well established that there is no need for such implied term to be expressed in the note or memorandum. If on the other hand the question of the deposit was to be left to the solicitors but that there was nevertheless a concluded agreement reached beforehand then in the absence of any mention of the deposit in the memorandum is irrelevant. Even if there had been, which there was not, an express agreement as to the amount of the deposit there would still be plenty of room for argument that it does not have to be referred to in the note or memorandum as it might not all in the circumstances of the case be regarded as "a material term". 25. The denials of contract in the solicitors' correspondence may or may not be helpful to the Defendants at the ultimate hearing but at this stage it could not possibly be said that the heads of agreement arrived at were definitely not intended to be a concluded contract. 26. The part performance argument can be dealt with very briefly. If there was a concluded agreement of the kind alleged in the statement of claim, that is to say, a composite contract and involving the sale of all the properties for a composite sum of £4 m. the completion which has in fact taken place of all the other sales must arguably constitute the relevant part performance. 27. For all these reasons therefore I would affirm the order of the learned High Court Judge and dismiss the appeal.Michael Chambers, Cleveragh House, Loughrea, Co. Galway."
THE SUPREME COURT
155/99
Denham, J.
Hardiman, J.
Geoghegan, J.
BETWEEN
SUPERMAC'S IRELAND LIMITED AND PATRICK McDONAGH
PLAINTIFFS
AND
KATESAN (NAAS) LIMITED AND PATRICK SWEENEY
DEFENDANTS
This is an appeal from the Order of the High Court (Macken J.) of the 15th March 1999 whereby the Defendants Motion to strike out the Plaintiffs claim on the ground that it was unsustainable and amounts to an abuse of the process of the Court was dismissed.JUDGMENT OF HARDIMAN J. delivered the 7th day of June 2000
This Order was sought under Order 19 Rule 28 of the Rules of the Superior Courts and, independently, under the inherent jurisdiction of the Court. At the hearing of this appeal, however, the claim to relief grounded on Order 19 Rule 28 was not pursued.
By Plenary Summons issued the 22nd May 1988 the Plaintiffs claim specific performance and certain declaratory and ancillary reliefs. In the Statement of Claim of the 25th November 1998, the essential claim is set out at paragraph 6 as follows:The Proceedings
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"By an agreement in writing and/or evidenced in writing dated the 7th November 1997 hereinafter referred to as the agreement) and varied in or about 14th November 1997 and made between the second named Defendant acting on his own be half and on be half of the first named Defendant of the one part, and the second named Plaintiff acting on his own behalf and/or on behalf of the first named Plaintiff of the other part, the second Defendant agreed, inter alia, to sell to the first and/or second named Plaintiffs the various fast food outlets identified at paragraph 5 hereof the businesses pertaining thereto and the premises for an aggregate consideration of £4, 000,000."
It appears that the Plaintiffs ran a restaurant franchising business in the course of which it entered into franchise agreements with individuals or companies, allowing them to operate fast food restaurants under the name "Supermac 's ". The first named Defendant operated a number of such restaurants from premises which it owned in Loughrea, Thurles, Roscrea, Tullamore and Kilkenny. In 1997 there were negotiations between the Plaintiffs and the Defendants with a view to the purchase of the restaurant properties. The Plaintiffs were also interested in buying premises in Naas which were not in fact in operation as a restaurant but which had planning permission for that use. These premises were occupied by a sitting tenant. The first named Plaintiff was the franchisor in all cases except that of the Naas premises and each premises was operated under a separate franchise agreement. The background to the proposed purchase seems to have been a dispute between the parties arising from the fact that the Defendants became involved in a major restaurant operation known as 'Mother Hubbards Roadside Restaurant" at Moyvalley, Co. Meath. The
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Plaintiffs were of the view that this was a breach of their obligations as franchisees and that the new premises would undoubtedly end up in direct competition with the franchised business. It also appears that the Defendants had purchased the premises in Naas and had applied for a further Supermac's franchise to be operated from it sometime in the year 1996 but that no such agreement had actually been completed, by reason of the dispute summarised above. It also appears that the purchase negotiations were facilitated by Mr Michael Chambers who was formerly a Bank Manager and is now a professional mediator. This gentleman was introduced into the transaction by the second named Defendant, Mr Patrick Sweeney. The latter says in his affidavit "at all times my understanding was that the goal of this mediation process was to work out an agreement in principle which would then be implemented following detailed negotiations between the parties respective solicitors".
The agreement sued upon is pleaded as being an agreement of the 7th November 1997 subsequently varied on the 14th November 1997. The document of the 7th November headed "Paddy Sweeney and Pat McDonagh, headings of agreement ". It is a typewritten document which has a space for the signature for both Mr McDonagh and Mr Sweeney but it is in fact signed only by Mr Chambers. On the hearing of this appeal Mr Cush S.C. conceded that it had to be assumed for the purpose of this motion that Mr Chambers was acting as the Defendants agent. This document recites that:The Agreement and Variation
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"Paddy has agreed to sell his freehold premises at Roscrea, Co. Tipperary, Thurles, Co. Tipperary, Loughrea, Co. Galway and Naas, Co. Kildare together with his leasehold premises at Tullamore, Co. Offaly and Kilkenny, Co. Kilkenny to Pat McDonagh."
It goes on to make various other provisions some of which are clearly directed to the orderly handing over of the business as a going concern. It provides for consideration under five separate headings totalling £4,000,000. In this document £1,940,000 is attributed to the properties and £1,390,000 to the goodwill. The variation document attributes a specific price to each property making an increased total of £2,875,00O in respect of property only. Other items however are adjusted leaving the overall consideration at £4,000,000. In relation to the Naas premises specifically the sum of £370,000 is ascribed. Other terms are substantially the same though there is an additional note about confidentiality and a hand over period of two years is envisaged. Part of the consideration is a consultancy fee payable to the Defendants "to ensure smooth transfer of the business ". This second document is not signed by any person.
It is undisputed that the sale of the other five premises has been completed.
By their present Motion the Defendants assert that the proceedings are unsustainable. It is said they amount to an abuse of the process of the Court and should be struck out in the exercise of the Court's inherent jurisdiction. There was no dispute between the parties as to the legal principles to be applied in considering this Motion. These have been extensively set out in the judgment of the learnedThe Present Motion
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trial judge and I need only say that I agree with what she says. The position is aptly summarised in Lac Minerals v Chevron Corporation (1995) ILRM 161 as follows:-
"The Judge acceding to an application to dismiss must be confident that no matter what may arise on discovery or at the trial of the action the course of the action will be resolved in a manner fatal to the Plaintiffs contention.
This clearly, is a very difficult hurdle for the Defendants to clear. On behalf of the Defendants, Mr Cush S.C. put his case with incisive brevity. He submitted that there was no concluded oral agreement between the parties and that, even if there was a concluded oral agreement, it is unenforceable because there is no sufficient note or memorandum to satisfy the Statute of Frauds. He says that the parties, in the persons of Mr Sweeney and Mr McDonagh had got together with a professional mediator to work out an agreement in principle but no more than that. The entire history of the transaction, he says, has to be read against the background of the correspondence between the solicitors all of which is marked "subject to contract". More specifically, Mr Cush submits that there was no agreement in relation to deposit or to completion dates. He agrees that there may have been a concluded agreement in relation to price but said that the other two matters are essential to a full agreement. He also points out that there is no provision in the alleged agreement to resolve the position about the sitting tenant in the Naas premises and in particular no agreement as to what would happen if vacant possession was not obtained. In fact, vacant possession was obtained in early 1998. Mr Cush stated that the core of his case was the failure, as he alleged, to reach any agreement on the question of deposit. He relied heavily on the judgment of this Court in Boyle v Lee (1992) 1 IR 555.
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For the Defendants, Mr McCann asserted that there was both a concluded agreement and a sufficient note or memorandum. He further submitted that, in any event, there was sufficient evidence of part performance of the contract: as the Plaintiffs see it, the contract has been five sixths performed.
It is convenient to deal first with the question of deposit because this is the core and height of the Defendants case. In Boyle v Lee, Finlay C.J. held that the parties had agreed that there would be a deposit but left it to their respective solicitors to agree the amount and form of it. In those circumstances, the learned Chief Justice said:-Deposit
"The amount of a deposit to be made, even if a purchaser is willing to make a deposit of the appropriate amount, or to the usual amount then experienced in transactions in Dublin, is too important apart of a contract for the sale of land in the large sum of £9O, 000 to be omitted from a concluded and complete oral agreement unless the parties in such an agreement had agreed that no deposit would be paid." (p.571)
It seems clear that this passage, if and insofar as it suggests that one can never have a concluded agreement for the sale of land without agreement as to the payment of a deposit, represented a considerable development of what the position had previously been. Both Barrett v Costelloe (High Court 13th July 1973 unreported) and Black v Kavanagh (1973)108 ILTR 91 had stated that it is not essential for a concluded agreement that there should be a stipulation in relation to a deposit. In the latter case Gannon J. having held that neither party attached any importance to the matter of the payment of a deposit or its amount, said:
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"The question of whether or not a deposit should be paid was not considered by the parties to be material matter, and in my opinion is not an essential term of such a contract."
The Plaintiffs' answer to the submission based on Boyle v Lee is first to distinguish that case on its facts and to contend that the evidence here is open to the interpretation that there was to be no deposit. This, Mr McCann said, could be decided as a matter of interpretation of the words and conduct of the parties: there is no necessity for an express agreement that there would be no deposit. Secondly, the Defendant contends that it is not obvious (and he need go no further for the purpose of this Motion) that the passage quoted above from Finlay C.J. represented the view of the majority. If it did, it would represent a substantial change in the pre-existing law: there is ample scope for argument, it was contended, that the judgment of O'Flaherty J. which is pivotal on the point having regard to the views expressed by McCarthy and Egan J.J., did not go as far as the Chief Justice on the question of deposit.
There is no doubt that an agreement in relation to deposit is usual in concluded agreements for the sale of land. But the cases prior to Boyle v Lee demonstrate that it is not invariable. The evidence on affidavit falls well short of certainty in relation to what if anything was agreed on this point and it must not be forgotten that the agreement was between Franchisor and Franchisee and involved the sale of assets other than real property in addition to the premises themselves. In such an agreement, I believe there is at least scope for contention that a deposit may not have been considered essential. It seems to me that the factual position will be a good deal clearer after discovery and, more importantly, oral
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evidence, and I could not say that I am confident that, no matter what transpired at the trial, the Defendant would necessarily win.
Furthermore, since there is scope for the view that the parties agreed nothing whatever about a deposit, it seems to me at least arguable that Boyle v. Lee is distinguishable in the present circumstances. The circumstances of that case were that there had been an express agreement that there would be a deposit. It is not manifestly clear that the judgment of the Chief Justice in that case was intended to apply to other circumstances. It is also in my view arguable that the judgment of Finlay C.J. did not represent the view of a majority. On a motion such as this it is neither necessary nor desirable to go further than saying that I am not convinced that the Defendant must win no matter what happens at the trial. It is noteworthy that Boyle v Lee was itself a decision of this Court after a full hearing in the High Court and Finlay C.J. was careful, at page 563 of the Report, to set out precisely what the oral evidence on this topic had been. In my view it would be necessary to hear the evidence in this case before a final decision can be made as to what if anything was agreed between the parties on this topic, what may be implied from what they did and from other facts and to hear legal argument based on that evidence.
Mr Cush also contends that the absence of agreement as to completion date is a fatal defect in the proposition that there was a concluded agreement. In relation to the Naas premises there was a statement on affidavit that completion was to be after vacant possession had been obtained; there was no reference to a completion date at all in relation to the other five properties. He further submitted that there was no evidence on the basis on which a completion date could be implied.Completion Date
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In Boyle v Lee, Egan J. at page 593 of his judgment stated that:
This is a long standing and, to my knowledge, unchallenged statement of the law. Accordingly, it cannot be said with certainty that, if the other essentials of a concluded agreement are present, the Plaintiffs case is bound to fail by reason of the non-specification of a completion date."It has long been established that where no time for performance is agreed the law implies an undertaking by each party to perform his part of the contract within a time which is reasonable having regard to the circumstances of the case: Simpson v Hughes(1896) 66 LJ Ch. 143."
Mr Cush contended that, in order to construe the November agreements as constituting a completed agreement for the sale of land, one has to construe the evidence as committing the Defendant to getting vacant possession. This is no where stated. He further points out that the evidence is silent on the question of what was to happen if vacant possession was not obtained. In paragraph 5 of his affidavit the mediator, Mr Chambers, says that the second named Defendant pointed out during discussions that the Naas property had a sitting tenant and that there was a court case pending in relation to that person's entitlements. He goes on:Vacant Possession
"As a result of this difficulty and because of the fact that vacant possession was not available, a sum of money was agreed to accommodate the eventuality of allowing this property out of a deal. In other words figures were agreed for either five properties or alternatively six properties."
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This is at variance with the Defendants contention that no provision was made about the eventuality that vacant possession was not obtained. It is unnecessary to go further than holding that there is clearly an evidential issue on this matter. There is also a legal issue which may arise as to the significance of the fact that vacant possession was, in fact, subsequently obtained. Furthermore, there is a distinction between the elements necessary to constitute a completed agreement on the one hand and the consequences of failure to honour such agreement in relation to vacant possession on the other. It is at least arguable that the parties failure to reach any agreement (if that is found to have occurred) on the question of vacant possession would merely have exposed the Defendant to a claim for damages, if vacant possession had not been obtained.
Mr Cush submitted that all discussions between Mr McDonagh, Mr Sweeney and Mr Chambers should be interpreted "against the background" of the correspondence between solicitors all of which was "subject to contract". This, he says, colours all dealings between the second named Plaintiff and the second named Defendant. In my view it is plainly arguable that the use of this rubric by the solicitors does not preclude the existence of a "done deal" between the parties themselves, which the Plaintiffs contend for. Insofar as it is contended that the Plaintiff is estopped by the use of the rubric from asserting a completed and enforceable agreement, this seems to me to be plainly a matter for evidence at the trial. I did not understand this point to be vigorously pressed on the hearing of the appeal.Subject to Contract
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The learned trial judge held that she had to approach this question on the assumption that the Plaintiffs will prove that Mr Chambers was acting as the Defendants agent. I agree with that finding. The Defendants submissions as to deposit, completion and vacant possession have already been summarised. The contention that the purported memorandum fails to record one or more of these matters must await a finding, after evidence has been heard, as to what was in fact agreed on these topics. Mr Cush says, however, that of the two documents produced by Mr Chambers, only the first in time is signed: he says that if two documents are to be read together, and only one is signed, it is imperative that the signed document must be the last in point of time "for it would be absurd to hold that a person who signed a document could be regarded as having signed another document which was not in existence when he signed the first" (McQuaid v Lynam (1965) IR 564 at 570)). The same case, however, is also authority for the proposition that where an oral agreement is intended to be the contract "evidence may be given of an agreed variation even if there is a memorandum or note of the contract but not of the variation ". In my view it is at least arguable that this is the case here and certainly oral evidence will be necessary in order further to explore the contention. The nub of the Plaintiffs case is that there was a "done deal ", as it is expressed, orally arrived at. There is a considerable similarity between the two documents and the variations apparently came about as a result of discussions or correspondence between the parties accountants as to the best way to effect the transaction. In my view it is not possible to be confident that discovery will not reveal further or otherNo Note or Memorandum
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documents on the topic of the variation and this too is a matter suggesting that the case go to trial.
On the topic of part performance, the issue as it can be discerned at present comes down to whether, as the Plaintiff, contends there was an overall contract to sell the six premises, the goodwill and other items for £4,000,000. The alternative, for which the Defendant contends is that there were six individual transactions so that the completion of five of them has nothing to say to the sixth. It seems to me obvious that it is at least possible that the evidence as a whole will disclose an overall transaction with the individual considerations, the subdivision thereof into various headings and the individual modes of completion tailored by the parties professional advisers so as to be mutually beneficial from a tax point of view and otherwise. Indeed, this proposition seems compatible with the background set out in Mr McDonagh' s affidavit of a decision to end the dispute which had arisen about the Defendants involvement with "Mother Hubbards" by the severance of their entire business connection. In all these circumstances I cannot say that I am confident that the Plaintiffs' contention must necessarily fail.Part Performance
For these reasons I would dismiss the appeal and affirm the order of the learned trial judge.Conclusion