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Cite as: [2012] IESC 41
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Judgment Title: Monica Kiely (nee Phelan) v Ronald Delaney and Patricia Delaney Neutral Citation: [2012] IESC 41 Supreme Court Record Number: 134/08 High Court Record Number: 2005 586 SP Date of Delivery: 10/07/2012 Court: Supreme Court Composition of Court: Fennelly J., O'Donnell J., McKechnie J. Judgment by: Fennelly J. Status of Judgment: Approved |
THE SUPREME COURT Appeal Number 134/2008 Fennelly J. O’Donnell J. McKechnie J. Between: MONICA KIELY (NEE PHELAN) Plaintiff/Appellant - and - RONALD DELANEY AND PATRICIA DELANEY Defendants/Respondents
JUDGMENT of Mr. Justice Fennelly delivered the 10th day of July, 2012.
1. This is an appeal by the plaintiff appearing in person against the judgment and order of the High Court (MacMenamin J) of 14th March 2008 on foot of a summons pursuant to the Vendor and Purchaser Act. The High Court held that a contract for the sale of lands by her to the defendants had not been duly and properly rescinded.
2. The case principally concerns the interpretation and application of two conditions in the Law Society of Ireland General Conditions of Sale (2001 edition). The underlying dispute arose from the inability of the appellant (vendor) to convey to the defendants (purchasers) the benefit of a right of way and the appellant’s purported rescission of the contract. The contract
3. The subject lands were a plot registered in folio number 3399 of the Register of Freeholders County of Dublin situate at Bettyville, Ballyboughal, County Dublin. The appellant had bought the lands on 26th September 2000 from one Desmond Byrne, since deceased. An entry on Folio 3399 stated that there was “appurtenant to the land” a right of way for all purposes over certain adjoining land
4. The lands were sold at auction and the contract signed on 28th May 2002. Mr James Gallagher bid at the auction and signed the contract in trust for the respondents. The auctioneer confirmed prior to the commencement of the auction that access to the land was in order. In response to a specific query made by Mr Gallagher before the contract was signed, this was reiterated and Mr Gallagher was shown a map of the lands on which what was described as a right of way appeared extending via a laneway to the northern boundary of the lands from the public road.
5. The price was €88,000 and a deposit of €8,500 was paid.
The facts
6. The purchaser’s solicitors delivered requisitions on title and also sought a map delineating the right of way. From the map provided it became apparent that the supposed right of way did not extend to the boundary of the land, but stopped short. The explanation was simple. On further investigation, it emerged that the appellant’s predecessor of title had subdivided the holding in folio 3399 by selling a plot at the northern side. The right of way had run to that plot and was thus severed from the holding at issue in this appeal. In order to preserve the benefit of the right of way for his own lands then retained, the vendor of that plot ought to have reserved a right of way over the plot then sold, but did not do so. The result was that there was no right of way appurtenant to the lands offered for sale on 28th May 2002 and purchased by the respondents.
7. There then ensued a period of more than three years prior to the issue of the present proceedings, during which unsuccessful attempts were made to resolve the problem of the absence of the right of way. It is not unfair to say that the appellant changed her position more than once. Her solicitors accepted after some months that a right of way could not be provided and offered to call off the sale. She accepted, or at least acquiesced in, the nomination of an arbitrator to determine the amount by which the price should be reduced to compensate for the absence of the right of way, before asserting nearly three years later that there was a right of way after all and finally purporting to rescind the contract.
8. The learned High Court judge held, inter alia, that the appellant had lost her contractual right through her unreasonable conduct. Consequently, it is necessary to outline the history of the post–sale conduct of the parties.
9. On examination of the map provided, the purchasers’ solicitors noted on 8th July 2002 that the right of way did not fully extend to the lands but did not know why. In ensuing correspondence, they suggested ways in which the matter might be addressed including a simple deed of grant of the right of way over the intervening property.
10. It was not until 13th December 2002, after many reminders in correspondence, that the appellant’s solicitors explained how the problem had arisen. The intervening plot of ground had, unknown to those solicitors, been sold earlier to a Mr Boylan but no right of way had been reserved. Nonetheless, the appellant (the vendor) had put tarmacadam over the entire way down to the property in ignorance of the exact boundary and had had no difficulty in entering the land along that route. In short, the defect in title was not denied, but access to the land had been enjoyed as if the right of way existed.
11. The purchasers’ solicitors asked that Mr Boylan be approached with a view to having the matter rectified. On 7th March 2003, the appellant’s solicitors wrote to say that it had not been possible to negotiate with Mr Boylan, who had made unreasonable demands which the appellant was unable to deliver. They said that their client was “not able to sell the said lands with the benefit of a full legal right of way” and that their client was prepared to refund the deposit. The purchasers’ solicitors wished time to consider the matter and asked for permission to have the lands valued. The appellant’s solicitors on 14th April 2003 served a seven-day notice to complete.
12. On 24th April 2003, the purchasers’ solicitors wrote referring to condition 33 b of the general conditions of the contract, saying that it would cost in the region of €25,000 to provide alternative access to the lands and asking the appellant to abate the price by that amount in which event their client would complete at the reduced price. In default of agreement, they invoked the arbitration clause at general condition 51 of the contract and called for the nomination of three persons as potential arbitrators.
13. The appellant’s solicitors replied on 15th May 2003 rejecting the proposal but offering a reduction of €5,000 to dispose of the matter if the sale were completed within seven days. They would take their client’s instructions regarding the appointment of an arbitrator. Around this time, the appellant changed her solicitors. The purchasers’ solicitors wrote to the President of the Law Society and Mr John F. Buckley was appointed as arbitrator apparently prior to September 2003. Thereafter Mr Buckley wrote repeatedly from September 2003 to February 2004 to the appellant’s solicitors without receiving any reply.
14. The appellant’s solicitors wrote to Mr Buckley on 26th May 2004, saying that they expected to have a Defence to the points of Claim, (which had been sent to the arbitrator on 8th April 2004) ready to be delivered within fourteen days. In fact, Points of Defence were not delivered until 13th October 2004. The Points of Defence denied that any representations had been made with regard to the existence of a right of way, relied on the Conditions of Sale to show that the purchaser bought with full knowledge of all rights of way, and claimed that no error had been made. It did not allege that there was a right of way.
15. Over the following months, the arbitrator endeavoured to find a suitable date for the hearing of the arbitration. Dates were suggested on several occasions largely without any reply from the appellant’s solicitors. Ultimately, they agreed on 22nd February 2005 as the date, but had difficulty about that date and 8th March was agreed, but the appellant’s solicitors asked that the hearing due to commence at 10:30 am be postponed to the afternoon.
16. On 2nd March 2005, the appellant’s solicitors wrote to the purchasers’ solicitors giving formal notice that the appellant would contend that the land had “the benefit of a right of way via the laneway at the northern boundary of the said lands, which is currently used to gain access to the lands and at all material times was used and continues to be used to gain access to these land.” They said that they would call evidence to that effect at the hearing to the arbitration.
17. This letter directly reversed the position taken by the appellant’s former solicitors almost two years before (7th March 2003) to the effect that she was unable to sell with the benefit of a right of way.
18. The hearing of the arbitration did not proceed on 8th March 2005, as the appellant was unwell.
19. On 20th April 2005, the appellant’s solicitors wrote to the purchasers’ solicitors. They said that the problem in relation to the right of way was the result of a conveyancing error and that “it was obviously never intended to leave these lands landlocked as they would otherwise be without a right of way.” They insisted, nonetheless, that the reality on the ground was that the right of way continued onto the lands, was used by their client without let or hindrance and that nobody had raised any objection to it. However, the appellant was not “in a position to obtain anything on writing from the adjoining landowner over which [sic] the laneway runs.” Accordingly, the appellant called on the respondents to withdraw their objection and requisition in relation to the right of way and to complete the sale. The letter then quoted condition 18 of the General Conditions of Sale. The solicitors confirmed that their client was unwilling to comply with the objection and requisition in relation to the right of way and gave notice in accordance with condition 18 that, if the requisition were not withdrawn not later than 29th April 2005 being a date in excess of five working days from the date of receipt of their letter the sale would be regarded as rescinded and that their client would return the deposit. The arbitrator would be asked not to proceed any further with the arbitration.
20. On 26th April 2005, the purchasers’ solicitors wrote objecting to the purported exercise of the power to rescind. They said that the problem with the right of way had been foreseeable and that the appellant’s solicitors should have obtained a special copy folio and file plan before the auction, which would have avoided the problem. They said that the exercise of the power to rescind was not reasonable, particularly having regard to the fact that almost three years had elapsed since the date of the auction.
21. On 10th June 2005, the appellant’s solicitors wrote to the purchasers’ solicitors confirming that they were instructed to rescind the sale. They enclosed a cheque for €8,500. There was some discussion about whether the arbitrator would have jurisdiction to determine the new dispute. In the event, the appellant issued the present proceedings by way of Special Summons in the High Court pursuant to s. 9 of the Vendor and Purchaser Act, 1874 on 23rd November 2005. The summons seeks a determination as to whether the said sale was duly rescinded. Affidavits were sworn by the second solicitor acting for the appellant, but not the first, by the solicitor who has at all times acted for the respondent and by Mr William Devine, solicitor, as an independent expert in conveyancing. Mr James Gallagher swore an affidavit dealing with the events at the auction.
The High Court Judgment
22. The learned High Court judge set out the history of the matter in even greater detail than I have. He made the following findings:
30. Second, a point which also emerges is that, on 13th December, 2002, Ms. Kiely’s then solicitor was prepared to acknowledge that a problem existed. But even from that point onwards, her stance was that any difficulty was inconsequential. As of 27th September, 2004, the defence received by the arbitrator again included a denial that any error had been made by the vendor in the contract of sale. 31. Third, as pointed out earlier, the vendor’s position shifted on at least two if not three occasions between the time of the auction and the bringing of the summons herein.
32. Fourth, Ms. Kiely’s conduct and delay led the Delaneys to act to their detriment. By any standard the issue could have and should have been resolved satisfactorily when the problem first came to light. This could have been done promptly by negotiation or arbitration. The policy was simply one of avoidance of any conclusion. All these events took place when the property market in Ireland was extremely active and when prices were escalating.
33. Fifth, in conjunction with the conduct which I consider was most regrettable, Ms. Kiely was guilty of delay of the most substantial kind before first raising the issue of the contractual conditions some three years after the auction. I consider this delay was substantial and blameworthy.”
24. The learned judge found against the appellant on both these points. On the first, he thought the result self-evident in the light of his own findings of fact, which I have quoted above.
25. The second point is rather more difficult. The learned judge relied particularly on the expert conveyancing evidence on affidavit of Mr William Devine. He said that it was not sufficient for the vendor’s solicitor to rely on the entries on the folio for the purpose of confirming the existence of a right of way appurtenant to the lands because it is well known that such entries are often not updated and are thus often out of date and inaccurate. The vendor’s solicitor should inspect the file plan before the sale. On the evidence, this had not been received from the Land Registry until July 2002. Although the folio map appeared to depict a right of way to the northern end of the lands, the vendor’s solicitors should have been alert to the possibility that the right of way no longer served the plot in sale. He found that there was a preparedness on the part of the vendor’s solicitor to take a calculated risk when there were significant warning signs to the contrary and thought this fell well short of what would be considered ordinary prudent conveyancing practice.
26. The learned judge went on, in addition, to consider, as he said “for completeness a further question which may arise…” That was whether the appellant was entitled to rely on condition 18 at all in a case where condition 33 applied, in other words whether the vendor could escape from the obligation to complete on the ground that the purchaser was not so much insisting on a requisition or objection and was not refusing to complete but rather was willing to complete at an abated price. Following a review of authority, the learned judge aimed to reconcile conditions 18 and 33. He held that condition 18 was designed to protect a vendor from the trap of being obliged to give what he or she cannot reasonably give, but that trap was removed where a purchaser can and does opt for compensation. Thus the appellant was not entitled to rescind where the purchaser had limited his claim to compensation.
The appeal
27. Although the notice of appeal was lodged by solicitors acting for the appellant, regrettably, she was not professionally represented at the hearing of the appeal. She appeared in person. This is particularly unfortunate in a case which raises a number of significant points of conveyancing law of a kind which infrequently present themselves in this Court. It would have been quite impossible for a lay litigant to deal with the complex technical conveyancing issues which had to be argued. Written submissions were however provided by both parties in the High Court. The Court indicated at the hearing of the appeal that it would take these into account.
28. I would paraphrase the grounds of appeal as they appear from the notice of appeal as arguing on behalf of the appellant that the learned High Court judge erred in the following respects:
• In holding that the right to rescind pursuant to condition 18 was not available to a vendor in a case where the purchaser maintains a claim for compensation pursuant to condition 33;
• In applying an incorrect legal test to the right to rescind pursuant to condition 18, namely whether her solicitor had been imprudent when drafting the contract for sale; • In failing to attach weight to the imprudence, negligence or recklessness of the respondents;
• In attaching excessive weight to the evidence on affidavit of a solicitor as to matters of law;
29. Condition 18 of the Law Society of Ireland General Conditions of Sale (2001 edition) provides:
30. Condition 33 provides:
(b) The Purchaser shall be entitled to be compensated by the Vendor for any loss suffered by the Purchaser in his bargain relative to the sale as a result of an error made by or on behalf of the Vendor provided, however, that no compensation shall be payable for loss of trifling materiality unless attributable to recklessness or fraud on the part of the Vendor nor in respect of any matter of which the Purchaser shall be deemed to have had notice under section 16 (a) nor in relation to any error in a location or similar plan furnished for identification only.
(c) Nothing in this Memorandum, the Particulars or the Conditions shall:
(i) Entitle the Vendor to require the Purchaser to accept property which differs substantially from the property agreed to be sold whether in quantity, quality, tenure or otherwise, if the Purchaser would be prejudiced materially by reason of any such difference, or (ii) Affect the right of the Purchaser to rescind or repudiate the Sale where compensation for a claim attributable to a material error made by or on behalf of the Vendor cannot be reasonably assessed.
(d) Save as aforesaid, no error shall annul the Sale or entitle the Vendor or the Purchaser, as the case may be, to be discharged therefrom”.
32. The learned author notes, however (at par. 15.28), that the right to avail of condition 18 is not limited to matters of title or conveyance but extends to “any other matter relating to the sale, eg as to descriptions of quantity.”
33. Murphy J considered the well-established case-law concerning the exercise of the contractual right of rescission in his judgment in the High Court in Lyons v Thomas [1986] I.R. 666. The vendor in that case had served a rescission notice under an earlier version of condition 18. There was a dispute between vendor and purchaser arising from the deterioration in the condition of the property being sold (an unoccupied dwellinghouse). The vendor refused to agree a reduction in the purchase price due to the damage to the property and served the rescission notice. Murphy J noted the wide terms of the rescission clause, but added, at page 677, that it was “settled law……that there are restraints imposed on a vendor seeking to invoke a clause of this nature.” He reviewed the case law, much of which is discussed by the learned High Court judge in this case. He did not think (see page 681) that “a purchaser who insists upon a right to be compensated for damage to property in which he is interested is acting unreasonably.” His conclusion was:
34. Murphy J, like MacMenamin J in the present case, reviewed the cases going back to the mid-nineteenth century. It may be sufficient to cite the dictum of Lord Radcliffe in Selkirk v Romar Investments Ltd [1963] 1 W.L.R. at 1422:
35. Finlay C.J. in Williams & another v Kennedy (Supreme Court unreported 19th July 1993) repeated part of this language, stating that the first principle was that “it must be shown if the vendor is to exercise his right in availing of the clause that he is acting reasonably, not arbitrarily, not capriciously.”
36. It seems to me to be very well settled, therefore, that a vendor may not unreasonably exercise the right to rescind conferred by a contract, even where it is expressed in the wide terms of condition 18. Indeed as Professor Wylie notes, the very words of the condition itself limit its exercise to cases where the vendor has reasonable grounds for doing so. There is a difference, of course, between reasonable grounds and reasonable behaviour, although there will in most cases be a relationship between the two. The courts have long recognised that equitable principles may act to restrain the conduct of the vendor.
37. In my view, it is perfectly clear that, on the facts of the present case, the appellant did not validly invoke the right to rescind the contract. The copy folio produced at the auction purported to show that there was to be a right of way appurtenant to the land. It is not absolutely clear whether the lands, without the right of way are landlocked. Some of the evidence says that they are. At any rate as the learned judge observed, the right of way “is clearly of considerable importance as an amenity to the land.”
38. The difficulty arose, apparently, from a conveyancing error. It is impossible not to have considerable sympathy for the appellant. This error was not her fault. Her original solicitor explained as early as December 2003 that the sale of the intervening strip of ground which was responsible for the severance of the right of way had been unknown to him. In March 2003 he said that this had come as a major surprise. The sale was effected by the appellant’s predecessor in title. The appellant apparently believed that the right of way existed based on evidence on the ground. However all that may be, it was not the fault of the respondents.
39. When early though desultory efforts to solve the problem had come to nought, the appellant, at least through her solicitors, permitted unforgivable delay to overtake the case. An arbitrator was appointed. The appellant delayed the conduct of the arbitration by failing to respond to correspondence, to produce Points of Defence or to agree a date for the arbitration.
40. Almost three years after the date of the contract, the appellant effected a complete volte face by claiming that she was, after all, in a position to provide the right of way. In view of the original explanations, this was completely implausible. Without the agreement of the purchaser of the intervening plot, there could be no right of way. That agreement was, it appears, not available. During all of this period, the respondents had made it clear that they were prepared to close the sale on the basis of condition 33, with an arbitrator determining the amount of compensation. The appellant permitted the matter to proceed to arbitration, though she did not cooperate with it.
41. In all of these circumstances, I am satisfied that the learned judge was perfectly correct to hold that the appellant acted so unreasonably that she lost her right effectively to exercise the right to rescind the contract.
42. That conclusion is sufficient to dispose of the appeal, which must be dismissed. However, I believe it is important to express a view on the second part of the case about which I am less satisfied. The learned judge headed this part of his judgment: “ Imprudence or recklessness?” He remarked that there seemed to be some uncertainty as to which of these terms gave the appropriate test.
43. The learned judge attached particular importance to the affidavit evidence of Mr William Devine, an eminent conveyancing solicitor, which was not contradicted. Mr Devine had considered, in some detail, the obligations of the vendor’s solicitor in a case where the land in the sale was said to have the benefit of a right of way. His central criticism related to the failure to requisition a copy of the folio and of the filed plan prior to the sale. In his view, "ordinary prudent conveyancing practice would require that this be done prior to the auction wherever the lands under sale do not abut a public highway…” His conclusion was that there was an omission "on the part of the vendors solicitor in the present case to take the normal and straightforward step of inspecting the filed plan in advance of the sale…”
44. The learned judge recalled the history of the folios, in effect the sale of the intervening plot, which led to all the trouble. He thought that these facts should have "alerted the vendors solicitors to the possibility that the right of way no longer served the plot in sale without an easement." He did not consider that “ the authorities fully established that ordinary imprudence on the part of a vendors solicitor would be sufficient to prevent rescission.” However, he added:
45. I would make two points about these passages. Firstly, the learned judge did not find any recklessness on the part of the appellant or her solicitors. He relied, in part at least, on the evidence of Mr Devine to establish, not recklessness, but imprudence. Secondly, he found that the vendors solicitor had taken "a calculated risk." There was, of course, evidence that the auctioneer, being the agent of the appellant, had given assurances prior to the auction that the access to the lands was in order. After the auction and prior to the signing of the contract, the vendor’s then solicitor gave a similar assurance. It was against that solicitor that the learned judge made the finding that he had taken "a calculated risk." I would be reluctant to uphold that finding. It is a serious one and, if true, it would arguably amount to a finding of recklessness. If the risk was a calculated one, it was taken with knowledge of at least some doubt concerning the right of way. I do not think the evidence justified such a finding. The case was heard on affidavit. I do not find any such an allegation made in the papers or even in the very detailed written submissions provided by the respondents. The appellant’s first solicitor did not swear any affidavit. If an allegation that he had taken a calculated risk had been made, he might well have been, and in fairness should have been asked to provide an affidavit. But the matter did not arise, since the allegation had not been made.
46. For the reasons mentioned above, the learned judge was undoubtedly justified in making a finding of imprudence. The vendor offered the land for sale with the benefit of a right of way which simply did not exist. The fact that the folio had earlier been divided should have put a careful conveyancing solicitor on notice of a possible problem. In short, there was imprudence.
47. However, the standard adopted in several of the passages from the authorities cited is "recklessness," or, perhaps more accurately, indifference to the interests of the purchaser bordering on recklessness. Professor Wylie, in the passage (par. 15.31) immediately following the one quoted above on the question of a reasonable exercise of the right to rescind proceeded to say:
48. Lord Radcliffe in the passage in his judgment in Selkirk v Romar Investments Ltd, cited above, continued as follows:
49. This passage is obviously the source for the second sentence in Professor Wylie’s passage. Finlay C.J. in Williams & another v Kennedy, cited above, also added as a second principle that: “ it must be shown that the vendor in entering into the contract in the form in which it was concluded between him and purchaser had not been reckless.” In that case, a contract for the sale of a property in Dublin erroneously contained a warranty with regard to the availability of planning permission. It had been held in the High Court and was upheld in this court that it was not reckless to have left this erroneous warranty in the contract.
50. The respondents relied particularly in the High Court on the decision in Baines v Tweddle [1959 1 Ch. 679, where two mortgages affected the property to be sold but the sale was to be free of incumbrances. The facts were found to be as follows:
51. Lord Evershed M.R. delivering the judgment to the Court of Appeal expressed the test in terms that “if the vendor here is to be disabled from asserting his contractual right to rescind, he must be shown to have had that shortcoming, which, although not amounting to anything in the nature of dishonesty, could be described as recklessness.” In that case, the vendor had taken what was described as "a considerable risk" in assuming that either the two mortgagees would join in the conveyance or that he could sell subject to the mortgage. He was held not entitled to rescind.
52. The test applied by Lord Evershed which he described as “the foundation of the case law on the whole subject-matter,” was laid down by Henn Collins M.R. in In re Jackson and Hayden’s Contract [1906] 1 Ch 412 at 422. It is admittedly expressed in a somewhat roundabout way, is as follows:
53. The reason the learned High Court judge questioned whether the test should be “imprudence or recklessness” was that the respondents had suggested in their written submissions in the High Court that the different test of prudence had been adopted in Irish law, particularly in the judgment of Costello J in Kennedy v Wrenne [1981] I.L.R.M. 81. In that case, Costello J found that, prior to his entry into the contract, the vendor had entered into an agreement to the effect that he would obtain the release of a mortgage affecting the property by the mortgagee, which was collateral to the main contract and held that he could not rely on the terms of the lattter to defeat his obligations under that prior agreement. He referred to Baines v Tweddle and to In re Jackson and Hayden’s Contract. It is true that none of the passages cited by Costello J expressly quote the words of the test laid down by Henn Collins M.R. He stated, however, that the qualifications to the right to rescind “which have ben put on by the courts over a great number of years ……have been well stated in the case of Jackson and Hayden’s Contract…” There is nothing to suggest that Costello J intended to vary the test laid down in that case. Murphy J cited the dictum of Henn Collins M.R. from In re Jackson and Hayden’s Contract in his judgment in Lyons v Thomas, already cited, without any hint of disagreement.
54. The learned judge in this case held that the authorities did not “fully establish that ordinary imprudence on the part of a vendor’s solicitor would be sufficient to prevent rescission.” His decision, therefore, was founded on his conclusion that there had been shown to be “preparedness on the part of the vendor’s solicitor to take a calculated risk when there were significant warning signs to the contrary.” He found that this to amount to “a very high degree of imprudence sufficient on the facts to constitute a bar to rescission.” This is not the same as a finding of what Lord Radcliffe called“unacceptable indifference to the situation of a purchaser who is allowed to enter into a contract with the expectation of obtaining a title which the vendor has no reasonable anticipation of being able to deliver,” which seems to be the principal source of Professor Wylie’s statement. Nor is it what Henn Collins M.R. described as a shortcoming “which, though falling short of fraud or dishonesty, might be described as 'recklessness.’
55. I would, therefore, not uphold that part of the learned judge’s judgment which held that the appellant was deprived of her right to rescind on this ground. 56. The learned judge also proceeded to determine the more general question of the relationship between conditions 18 and 33. This was based on the interpretation of those conditions in the light of the contract as a whole. He held that the appellant was not entitled to rescind where the purchaser had limited his claim to compensation. The point clearly has broader implications. It is not dependant on the facts of this particular case. The judge had written submissions and arguments from both parties. He declined to accept the authority of Ashburner v. Sewell (1891) 3 Ch. 409. In circumstances where the court has not had the benefit of submissions on the point from one party and where it is, in any event, not necessary to decide it, I would prefer to leave the matter for consideration in a later case.
57. For the reasons I have given, I would dismiss the appeal.
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