THE SUPREME COURT
[Appeal No. 160 of 2010]
O’Donnell J.
Laffoy J.
O’Malley J.
BETWEEN
P. J. McGRATH
PLAINTIFF/RESPONDENT
DEFENDANT/APPELLANT
AND
BETWEEN
P. J. McGRATH AND THOMAS McGRATH
PLAINTIFFS
DEFENDANT/APPELLANT
Judgment of Ms. Justice Laffoy delivered the 29th day of July, 2016
Underlying High Court proceedings leading to judgment and orders appealed against
1. The two plenary actions underlying this conjoined appeal were heard together in the High Court. In the first, the plaintiff, as purchaser, and in the second, the plaintiffs, as purchasers, sued the defendant, as vendor, for specific performance of two contracts, each of which was for the sale of property in the City of Dublin. Apart from the obvious fact that each of the contracts related to a different property, there is very little difference between the two contracts in issue and between the factual basis, the pleadings and the procedural process in both actions. That being the case, it is convenient to outline the background to this appeal by reference to the first plenary action.
2. The contract the subject of the first plenary action (Record No. 2004/10969P) was a contract in the standard form published by the Incorporated Law Society of Ireland for a sale by private treaty which was dated 8th June, 1998 and was expressed to be made between the defendant in the first action (Mr. Stewart), as vendor, and, in its final form, by the plaintiff in the first action, P.J. McGrath (Mr. McGrath) in trust, as purchaser, for the sale of the dwelling house and premises know as 14 Rutland Street in the City of Dublin at the price of IR£25,000. The relevant features of the contract were the following:
(a) that the interest being sold was a long leasehold interest for the residue of a term of nine hundred and four years from 29th September, 1882;
(b) that the special conditions did not disclose that the sale was subject to any tenancy, so that by virtue of General Condition 21, ex facie, Mr. McGrath was entitled to vacant possession on completion of the sale;
(c) that the closing date was 23rd July, 1998; and
(d) that a deposit of IR£2,500 was payable by Mr. McGrath on the execution of the contract.
The correspondence put before this Court demonstrates that the solicitors for Mr. Stewart, Stewart & Co., sent that contract and two other contracts, to Mr. McGrath’s solicitors, Tom Collins & Co. on 8th June, 1998 on a “subject to contract/contract denied” basis. The contracts as so furnished named William Black (Mr. Black) as purchaser. Mr. McGrath’s solicitors having obtained confirmation from Mr. Black that it was in order to do so, Mr. McGrath’s name was substituted for Mr. Black’s name as purchaser. The contracts thus amended were returned to Mr. Stewart’s solicitors by letter dated 25th June, 1998 together with a cheque, which will be referred to at the end of the judgment, which covered the deposit on that transaction and on the two other transactions and also requisitions on title. Of the other two contracts, one, which was the subject of the second plenary action (Record No. 2004/10973P), was for the sale of 9 Summerhill Place in the City of Dublin to Mr. McGrath (in trust) for IR£25,000 on similar terms to the terms in relation to the sale of 14 Rutland Street outlined above. The subsequent interaction between the parties and the pleadings disclose that Mr. McGrath was contracting to purchase 9 Summerhill Place in trust for himself and the second named plaintiff in the second plenary action, Thomas McGrath (the second Respondent).
3. On 2nd July, 1998, in accordance with normal practice, one part of the contract signed by both Mr. Stewart and Mr. McGrath was returned to Mr. McGrath’s solicitors. Subsequently by letter dated 10th July, 1998 Mr. Stewart’s solicitors furnished their replies to the requisitions on title, which were in the standard form published by the Law Society. The replies disclosed that the property was occupied by a tenant who was in possession at a weekly rent. By letter dated 8th September, 1998, Mr. McGrath’s solicitors informed Mr. Stewart’s solicitors that their client would seek vacant possession on closing of the transaction. The response of Mr. Stewart’s solicitors by letter dated 14th September, 1998 was that they were not in a position to give vacant possession on closing of 14 Rutland Street or of 9 Summerhill Place, which the replies to the relevant requisitions disclosed was also occupied by a tenant who was in possession at a weekly rent.
4. As regards the third contract, which related to another property in the area, 13 Summerhill Place, of which Mr. Stewart had vacant possession, the sale of that property was completed on 9th October, 1998. However, neither the sale of 14 Rutland Street nor of 9 Summerhill Place was completed. Thereafter correspondence continued from Mr. McGrath’s solicitors to Mr. Stewart’s solicitors seeking to know when the transactions could be completed with vacant possession. Although the relevant letter has not been put before this Court, it would seem that the last item of correspondence was a letter of 23rd May, 2000 from Mr. McGrath’s solicitors, which, as recorded in the judgment of the High Court referred to later (at p. 3), sought confirmation of the position regarding vacant possession and noted Mr. McGrath’s desire to close the sale. There was no response received to that letter or to any of the earlier letters, the last of them being dated 28th March, 1999.
5. Nothing happened after that for over four years. On 11th June, 2004 Mr. McGrath’s solicitors served a notice to complete on Mr. Stewart calling on Mr. Stewart to complete the sale within twenty eight days after the date of service of the notice and indicating that, in the event of failure to comply with the notice, Mr. Stewart, as vendor, would be deemed to have failed to comply in a material respect with the conditions of the contract and Mr. McGrath, as purchaser, would elect to pursue remedies available to him under the contact. The notice to complete was not complied with.
6. The first plenary action was initiated by a plenary summons which issued on 15th July, 2004, in which Mr. McGrath sought specific performance of the contract dated 8th June, 1998 in relation to 14 Rutland Street and damages. A statement of claim was delivered on 31st January, 2005 in which the reliefs claimed were specific performance of the contract and damages in lieu of specific performance. A defence and counterclaim was delivered by Mr. Stewart on 17th February, 2005 in which it was asserted that Mr. McGrath’s claim was statute-barred and, without prejudice to that plea, the various matters pleaded by Mr. McGrath were traversed. In the counterclaim, it was pleaded that the sale, which was denied, was subject to “existing tenancies” and that it was an express provision of the contract that Mr. McGrath would not be given vacant possession on closing. Rectification of the contract was sought.
7. It is disclosed in the outline submissions filed on behalf of Mr. Stewart that, by motion dated 1st April, 2005, Mr. Stewart sought orders striking out the first plenary action and the second plenary action on the basis, inter alia, that neither disclosed a reasonable cause of action. That motion having come on for hearing on 16th December, 2005, the relief sought was refused. That is mentioned merely because affidavits filed on the motion were mentioned in the pleadings in the circumstances outlined later. Those affidavits are not before this Court and their status in the High Court is not clear.
8. Both plenary actions were heard together in the High Court before Murphy J. (the trial judge) over two days on 14th and 15th October, 2008. Judgment was delivered by the trial judge on 11th November, 2008 ([2008] IEHC 348).
The judgment of the High Court
9. Having outlined the factual background more comprehensively than has been done in this judgment, the trial judge made a number of findings which are of relevance on this appeal.
10. First, he found that Mr. McGrath had contracted with Mr. Stewart to purchase his interest in the properties, but not a qualified interest subject to tenancies. He stated (at p. 5):
“The agreement was that he would purchase the properties with vacant possession. The contractual documents are consistent only with the interpretation that the plaintiff was to acquire vacant possession. I am satisfied that it was not until after he entered into the contract that he was informed of the expectation that he would take the properties subject to the existing tenancies. Accordingly, he contracted not for a title subject to tenancies but for the acquisition of all three properties without tenants.”
11. Secondly, the trial judge addressed another issue which had been raised which he stated was:
“. . . whether the parties had ever reached a consensus ad idem, and thus whether they had entered into a valid contract.”
Having observed that he had reservations in relation to the consideration of that question, since the issue was not pleaded, he stated that, in his view, the submission was not well founded in any event. Later, having analysed a number of authorities, he stated that, taking an objective view of the circumstances, it could not be said that Mr. Stewart’s mistaken understanding of the agreement, which I understand to mean his understanding that the sales of 14 Rutland Street and 9 Summerhill Place were subject to existing tenancies, was justified.
12. Thirdly, the trial judge addressed the contention of Mr. Stewart that Mr. McGrath had not come to Court seeking equitable relief with clean hands. Having reiterated that he was satisfied that the parties had entered into a valid contract for the sale of the three properties with vacant possession, the trial judge pointed out that specific performance is a discretionary remedy. He went on to consider whether, in relation to the transactions, Mr. McGrath had come to equity “with clean hands”, by reference to the various allegations made against Mr. McGrath, for example, that he acted otherwise than in good faith. However, he rejected all the allegations and he rationalised that rejection.
13. Fourthly, the trial judge addressed Mr. Stewart’s contention that Mr. McGrath was guilty of laches. In so doing, the trial judge identified the criteria which must be satisfied in order for that defence to be successful by reference to the decision of the High Court in J.H. v. W.J.H. (Unreported, High Court, 20th December, 1979), quoting the following passage from the judgment of Keane J. (at p. 35):
“I have no doubt that the interval of time which elapsed before the proceedings were issued in the present case could properly be described as substantial. That, however, is not sufficient . . . there must also be circumstances which render it inequitable to enforce the claim after such a lapse of time. I must accordingly consider the circumstances in which the defendant will now find himself if the plaintiff’s claim is allowed, as contrasted with the circumstances in which he would have found himself if the plaintiff had successfully prosecuted proceedings in 1973 or earlier.”
The trial judge recognised that in the case before him the Court was confronted with a delay of lesser duration than had arisen in J.H. v. W.J.H., but stated that there was a substantial delay nonetheless. He referred to the fact that the contract was entered into in 1998, that it became clear later that year that Mr. Stewart did not intend to convey the property otherwise than subject to the existing tenancies, that the completion date was 23rd July, 1998 and that Mr. Stewart was in breach from that date in failing to complete the sale and that the proceedings were not instituted until July 2004. The trial judge then stated (at p. 12):
“Where the defendant has indicated an intention not to perform the contract, either by express repudiation or otherwise, the plaintiff is expected to pursue his claim with greater expedition. The same is true where, during the period of delay, the plaintiff knew of the manner in which the defendant would be prejudiced by his failure to act expeditiously (Spry, Equitable Remedies, 5th Ed, 1997, p 232-233). Both of these circumstances arise here.”
Further, the trial judge rejected the explanation advanced for the delay by Mr. McGrath, being unable to conclude that the explanation was a plausible one.
14. The trial judge then considered whether the circumstances were such as to render an order for specific performance inequitable. Referring to the judgment of Keane J. in J.H. v. W.J.H. again, the trial judge stated that Keane J. had concluded that the defence of laches was made out by virtue of the added financial burden on the defendant in that case that resulted from the massive increase in market value of the property in issue and that the same circumstance applied to the case before him, indeed to a greater extent. He recorded that, while the contract price for each of the properties the subject of the actions before him was fixed at IR£25,000, the expert evidence given at the trial valued each somewhere between €250,000 and €270,000. He continued (at p. 14):
“Even in the uncertain climate currently prevailing in the property market, the defendant could not hope to acquire equivalent properties for a sum equivalent to the contract price agreed in 1998. Accordingly, I am satisfied that to make an order of specific performance against the defendant would be inequitable.”
15. On that basis, the trial judge concluded that the defence of laches succeeded. He then stated (at p. 15):
“Accordingly, the decree of specific performance should be refused on the ground of laches. However, even if I am wrong in that conclusion, it has been established that where a decree of specific performance is sought, damages can be awarded in lieu thereof where a delay such as to make damages more appropriate has occurred, even where the defence of laches has not been established (White v. McCooey [1976-77] ILRM 72).”
16. While the trial judge made it clear that, unlike the situation here, the defence of laches had not been established in White v. McCooey, it is convenient at this juncture to consider the circumstances in which, in that case, Gannon J., in the High Court, considered it appropriate to award damages in lieu of specific performance. As here, the action was an action by a plaintiff purchaser against a defendant vendor and it was for specific performance of a contract for the sale of a licensed premises and, as Gannon J. stated in his judgment (at p. 73), “alternatively for damages for breach of contract”. A number of defences were raised by the defendant, all of which were rejected by Gannon J. For instance, he found that the defendant had not established a line of defence based on the contention that there was such disparity between the price which the defendant might reasonably have expected from any other buyer and the price the plaintiff was paying as would suggest unfairness about the contract. On the plea of laches, Gannon J. stated (at p. 86):
“As to the plea of laches on the part of the plaintiff there is no evidence from which I could be asked to infer that the plaintiff intended to abandon his claim nor have I any evidence of injurious affect upon the defendant’s position by such delay as did occur. . . . Nevertheless there are necessarily some changes and circumstances of which I think I should take account in the exercise of the Court’s discretion as to the remedy to be given the plaintiff on his claim.”
Having outlined certain difficulties which might be encountered on the particular facts of that case, which related to the transfer of the publican’s licence attached to the premises and the contractual relations between the defendant and his tenants, Gannon J. stated that the proper relief in the case was to award to the plaintiff a sum of damages in lieu of specific performance. A significant feature of the decision of Gannon J. for present purposes is that he found that the plaintiff purchaser had established an entitlement to have the contract specifically enforced but he exercised his discretion as to the remedy to which the plaintiff was entitled and he determined that damages in lieu of the specific performance was the proper remedy.
17. Having diverged from the outline of the judgment of the trial judge in this case, to highlight the manner in which the decision in White v. McCooey is distinguishable from it, I will now return to it. The trial judge then went on to consider whether damages could be awarded to the plaintiff and he stated (at p. 15):
“Even where a plaintiff has sought a decree of a specific performance in circumstances where he had no right to do so, it is open to the court to award damages in lieu of a decree (Duggan v. Allied Irish Building Society (Unreported, High Court, Finlay J., 4th March 1976)). The plaintiff has sought such damages in the event of the refusal of a decree and the court must now consider how they are to be quantified.”
18. As an introduction to addressing how damages in lieu of specific performance should be measured, the trial judge quoted a passage from the judgment of this Court delivered by Walsh J., with whom Budd and Fitzgerald JJ agreed, in Holohan v. Ardmayle Estates (Unreported, Supreme Court, 1st May, 1967). Expanding the passage quoted slightly, Walsh J. stated:
“The present claim, however, as in all actions for specific performance, is grounded upon the submission that the contract is in being and that it is to be enforced. I take the view, therefore, that when the facts of the case are such that the trial judge is of opinion that he could make an order for specific performance but in his discretion does not do so but awards damages in lieu thereof, he must take into account in assessing the damages not merely such items as the loss of bargain and other loss which flows from that breach but the out of pocket expenses and other money laid out by the plaintiff which would naturally include any part of the purchase money already paid.”
The significant feature of the case under consideration by the Supreme Court which emerges from that passage is the emphasis on the trial judge being of opinion that “he could make an order for specific performance”, but having the discretion to award damages in lieu thereof.
19. There followed an analysis by the trial judge of a number of authorities on the quantification of the damages and on the factual scenario on the basis of the evidence he had heard. He set out at the end of his judgment the basis on which he considered that damages should be assessed in each of the plenary actions before him. He stated (at p. 22):
“From the market value as at mid 2005 (or the date of judgment if the latter is a lesser figure) will be subtracted the contract price of the properties. In light of the decision of the Supreme Court in Holohan, the plaintiff is also entitled to the return of the deposit paid in respect of the two properties. The total arrived at is to be calculated according to this method in respect of each property.”
Earlier, the choice of “mid 2005” was explained. It was chosen “as being three and a half years preceding the date of judgment in this action”.
20. On the delivery of the judgment of the trial judge, each of the plenary actions was adjourned so that the Court could hear evidence as to the market value of each of the properties in sale as at mid 2005. That hearing took place on 6th February, 2009, when the trial judge heard oral evidence of Peter Quigley of Douglas Newman Good, Estate Agents and Valuers, on behalf of Mr. McGrath and further evidence of Mr. Stewart. The order of the High Court on each of the plenary actions was made on 13th February, 2009.
The orders of the High Court
21. Both orders of the High Court are in the same format and have precisely the same effect. Once again, it is convenient to consider the order made in the first plenary action (Record No. 2004/10969P). The effect of the judgment delivered on 11th November, 2008 was recorded as follows:
“The Court refused the Plaintiffs claim for a decree of Specific performance of the contract for sale between the Plaintiff of the one part and the Defendant of the other part dated 8th June, 1998 for the sale by the Defendant to the Plaintiff of all the hereditaments and premises commonly known as 14 Rutland Street in the City of Dublin.
And the Court awarded damages in lieu of a decree of specific performance and ordered and adjudged that the Plaintiff do recover against the Defendant damages to be assessed in accordance with the method set out in the said judgment.”
The finding of the trial judge following the hearing on 6th February, 2009, which was declared on 13th February, 2009, and the subsequent assessment of damages was recorded as follows:
“The Court doth find that the market value of the said property as at mid 2005 was €170,000.00.
In accordance with the method set out in the said judgment delivered on the 11th day of November 2008 the Court doth assess damages in lieu of a decree of specific performance in the sum of €141,589.61.”
It is difficult to relate the final figure to the method set out in the judgment in that difference between the sum found to be the value of the property at mid 2005, €170,000, and the final figure, €141,589.61, is in excess of €3,300 less than the Euro equivalent of IR£25,000. However, that is a minor point. In the order, Mr. McGrath recovered against Mr. Stewart the costs of the action including any reserved costs, when taxed and ascertained.
The appeal
22. The orders of the High Court having been perfected on 19th November, 2009, notice of appeal was filed on behalf of Mr. Stewart in this Court on 16th June, 2010 against both orders of the High Court.
23. The grounds of appeal set out in the notice of appeal can be broken down into the following components, which will be outlined by reference to the first plenary action:
(a) There are eleven grounds which contend that the trial judge erred “in ignoring or not taking any or any sufficient account of certain evidence”, which is described as “uncontradicted evidence” given by three witnesses who were called to give evidence on behalf of Mr. Stewart, including Mr. Stewart. The eleventh ground asserts that even on the basis set out therein alone, there was no consensus ad idem and therefore no agreement between the parties.
(b) It is asserted that, if there was an agreement between Mr. Stewart and Mr. McGrath, which is denied, the trial judge erred in failing to hold that the failure and/or refusal of Mr. McGrath to complete the sale amounted to a repudiation thereof and that the contract was thereupon at an end and entitled to be so treated by Mr. Stewart.
(c) It is asserted that the trial judge erred in fact and in law in having held on the one hand that there was delay on the part of Mr. McGrath in issuing proceedings which disentitled him to specific performance and that he then in error granted to Mr. McGrath damages in lieu of specific performance, as if he was entitled to specific performance, when he should have dismissed Mr. McGrath’s claim and recognised and held that Mr. McGrath was not entitled to the reliefs sought on account of such delay and inactivity.
(d) Without prejudice to the foregoing grounds, it is asserted that the trial judge erred in his assessment of the damages on various bases.
The relief which Mr. Stewart seeks on the appeal, as outlined in the notice of appeal, is an order dismissing the claims in each of the plenary actions for specific performance or damages in lieu thereof in their entirety.
24. Outline submissions were filed on behalf of Mr. Stewart on the appeal on 26th May, 2016. In the outline submissions, having outlined Mr. Stewart’s version of the facts, three issues were identified for determination on the appeal, which, by reference to the first plenary action, may be outlined as follows:
(a) Whether there could have been consensus ad idem between the parties given the unilateral insertion by Mr. McGrath’s solicitor “by Tippex” of the name of Mr. McGrath as purchaser onto the contract with Mr. Stewart as vendor “in circumstances where the uncontradicted evidence of [Mr. Stewart], the beneficial owner that at all material times were selling the [property] subject to [tenancy] to Mr. Black”.
(b) Whether the unilateral insertion of the name of Mr. McGrath, described as “a third party”, “who is not a party to the contract without the consent of the beneficial owner/vendor” has the capacity “to bind the beneficial owner of the property to convey the same to that third party”.
(c) Whether an award of damages in lieu of specific performance can be made where a defence of laches succeeds in defeating a claim for a decree of specific performance.
As regards the issue at (a), it would appear that the issue was intended to be formulated as whether, given the uncontradicted evidence of Mr. Stewart and the beneficial owner, that they were selling the property subject to tenancy to Mr. Black, there could have been consensus.
25. In the replying outline submissions filed on behalf of Mr. McGrath and the second Respondent on the appeal on 20th June, 2016, having recognised that the nineteen grounds of appeal in the notice of appeal had been netted down to those three issues, those issues were addressed.
26. The basis on which the issues outlined at (a) and (b) in para. 14 above are advanced is that all three properties the subject of the transactions in 1998, including 14 Rutland Street and 9 Summerhill Place, were beneficially owned by Mr. Matthew Kelly (Mr. Kelly) and that Mr. Stewart only held the legal title. That is recognised in the judgment of the trial judge, as is the fact that Mr. Stewart was at all material times the solicitor for Mr. Kelly. Both issues are premised on the proposition that Mr. Stewart, who executed the contracts as vendor simpliciter (by which I mean, without disclosing that he held the property in trust) and was, in any event, acting for Mr. Kelly in the sales, did not have capacity to bind Mr. Kelly. Indeed, on the hearing of the appeal counsel for Mr. Stewart sought to advance that argument. Nowhere in the pleadings in either of the plenary actions is any lack of capacity on the part of Mr. Steward been pointed to. Aside from the plea that the claim was statute-barred, and the invocation of laches, the defence was that Mr. Stewart had no liability because the entirety of the claim was traversed, including the denial of the existence of an agreement and, even if an agreement existed, the denial that Mr. Stewart had liability to Mr. McGrath on the basis asserted on various grounds, for example, that the sale of 14 Rutland Street was subject to the existing tenancy. Further, as has already been recorded, in the counterclaim, Mr. Stewart sought rectification of the contract, the clear implication being that he had capacity to do so. The only reference to Mr. Kelly in the pleadings is a reference to an affidavit sworn by him on 30th June, 2005, presumably, on the motion to strike out referred to above (para. 7), which was one of a number of affidavits stated to set out the sequence of events, in reply to a request in a notice for particulars dated 13th July, 2005 issued on behalf of Mr. McGrath requesting that the full facts upon which it was alleged or claimed that Mr. McGrath was not ready, willing and able at the time of service to complete the sale. As has already been noted, those affidavits are not before the Court.
27. Moreover, I see nothing in the judgment of the trial judge to suggest that an argument was made to him on the consensus ad idem point that there was no consensus because Mr. Kelly, as the beneficial owner, was not bound. Quite clearly, the trial judge was treating Mr. Stewart, the defendant in both plenary actions, as the vendor and it was Mr. Stewart’s “mistaken understanding” which he addressed in the context of the consensus ad idem point, as outlined above (at para. 11).
28. For the foregoing reasons, I have come to the conclusion that issues (a) and (b) cannot be pursued on this appeal. Even if they could, this Court would be confronted with an insuperable problem. There is no transcript available of the hearing before the trial judge on 14th and 15th October, 2008 or of the hearing on 6th February, 2009. No digital audio recording of the hearing is available. There is not even an agreed note of the evidence given at the hearings. On the hearing of the appeal, this Court was furnished, for the first time, with notes of the evidence given on 14th and 15th October, to the High Court, which notes were prepared on behalf of the respective parties by their respective legal teams and in which there are conflicting accounts of the evidence.
29. Even if this Court had a satisfactory record of the evidence given in the High Court, and if the Court considered it appropriate to entertain issues (a) and (b), careful consideration would have to be given to the extent, if any, to which the findings of the trial judge could be interfered with, having regard to the jurisprudence of this Court and, in particular, the judgment of McCarthy J. in Hay v. O’Grady [1992] 1 I.R. 210. In any event, I have come to the conclusion that it is proper for this Court only to entertain issue (c). Accordingly, the issue which remains is whether a court may award damages in lieu of specific performance where the defence of laches has been upheld by the court and the court has found that a decree of specific performance should be refused and, in particular, whether Mr. McGrath, having been found guilty of laches, was entitled to damages in lieu of specific performance, as was found in the first plenary action.
Entitlement to damages in lieu of specific performance?
30. As is clear from the outline of the judgment of the trial judge above, the trial judge made an adverse finding against Mr. McGrath, as plaintiff, in the first plenary action, and also against both plaintiffs in the second plenary action, in that he found that the defence of laches must succeed and that the decree of specific performance should be refused on the ground of laches. Significantly, that finding was not cross-appealed by the respondents on this appeal, nor was any notice to vary filed on their behalf. Indeed, on the hearing of the appeal, counsel for the respondents argued that, notwithstanding that finding, the trial judge was entitled to award damages to the respondents, his principal arguments being that -
(a) the decision of the High Court in Duggan v. Allied Irish Building Society was authority for that proposition;
(b) what the respondents were seeking was damages for breach of contract; and
(c) although the relief sought in the statement of claim was damages in lieu of specific performance, in the plenary summons the relief sought was damages without qualification.
31. The jurisdiction to award damages in lieu of specific performance was first conferred on the Courts of Chancery in Ireland by the Chancery Amendment Act 1858 (21 & 22 Vict. c27), commonly known as Lord Cairns’ Act, s. 2 of which provides:
“In all cases in which the Court of Chancery has jurisdiction to entertain an application for an injunction against a breach of any covenant, contract, or agreement, or against the commission or continuance of any wrongful act, or for the specific performance of any covenant, contract, or agreement, it shall be lawful for the same Court, if it shall think fit, to award damages to the party injured, either in addition to or in substitution for such injunction or specific performance; and such damages may be assessed in such manner as the Court shall direct.”
As is pointed out in Buckley, Conroy and O’Neill on Specific Performance in Ireland (Dublin, 2012) (at para. 10.16), while s. 2 was repealed in 1883, the jurisdiction to award damages in lieu and in addition to specific performance continued, as the repealing statute contained a saver in respect of any jurisdiction or rule of law or equity established or confirmed by or under any previous enactment. The authors (at footnote 42) helpfully identify the repealing statute and also the saver provision and a later saver provision.
32. The claim of the plaintiff in Duggan v. Allied Irish Building Society in the High Court proceedings before Finlay J. was described as follows in the judgment (at p. 12):
“In them the plaintiff claims firstly specific performance of an agreement to advance to him the sum of £32,000 upon the security of a mortgage, secondly in the alternative damages for breach of that contract and further and other relief and costs.”
The defendant lender in that case raised a number of defences, the second being that, as a matter of law, the plaintiff was not entitled to specific performance of an agreement to make an advance and could not accordingly obtain damages in lieu of such specific performance either. In relation to this ground of defence, Finlay J. stated (at p. 15):
“With regard to the second ground of defence ultimately relied upon namely that the plaintiff is not entitled as a matter of law to a decree for specific performance and that accordingly the Court cannot award to him damages as an alternative I am satisfied on the authority of the decision in Roger v. Challis 27 Bevin Reports 175 and of Larios v. Gurety Law Reports 5 Privy Council 346 that the Court cannot and should not grant specific performance of a contract to advance money even where the contract is in the form of a contract to enter by the defendants into a legal mortgage. The second part of the contention, however, which of course is the vital one from the defendants point of view namely that there being no power to grant specific performance there is no power to grant damages in lieu thereof fails completely having regard to the provisions of the Judicature Acts. It is quite clear that the necessity for a right to exist or to have existed at the time of the commencement of an action to an order for specific performance as a condition precedent to the granting of damages applied only at a time when the Courts of Equity were separated from and distinct in their powers and jurisdiction from the Courts of Common Law. If in fact I am satisfied that the defendants had been in breach of this contract then the plaintiff upon proof of loss is entitled to damages for that breach irrespective of whether he could at law have obtained an order for specific performance of it.”
Finlay J. stated that, in the circumstances before him, he was satisfied that the defendants had been guilty of a breach of the contract which they entered into to advance the sum of £32,000 to the plaintiff and that the plaintiff was entitled to damages for that breach.
33. The reference in the second passage from the judgment in Duggan v. Allied Irish Building Society quoted above to the Judicature Acts is obviously a reference to the series of statutes which commenced with the Supreme Court of Judicature (Ireland) Act 1877 (40 & 41 Vict. c57) (the Act of 1877) and subsequent Acts which amended it and which were enacted before 1922. Those Acts changed the structure of the courts in Ireland and, in particular, outlined the jurisdiction vested in the various courts and how common law and equitable jurisdictions were to be exercised by each court. Counsel for Mr. McGrath referred the Court to the recent judgment of the High Court (Hogan J.) in Meagher v. Dublin City Council [2013] IEHC 474, in which the extent of what is usually referred to as the “fusion of law and equity” in consequence of the Act of 1877 was discussed in the context of the issue which arose there. It is useful to consider that judgement before considering the judgment in Duggan v. Allied Irish Building Society further.
34. It is clear from the judgment of Hogan J. that what he was considering was a claim for a liquidated sum of money, which had been initiated by way of summary summons which issued on 9th March, 2005. The proceedings were subsequently remitted to plenary hearing. As is pointed out by Hogan J. (at para. 17), the claim was for damages for breach of contract. Laches was pleaded as a defence. The issue addressed by Hogan J. which is of interest for present purposes is whether the equitable doctrine of laches could be utilised to defeat a claim for damages for breach of contract at common law which is otherwise not statute-barred. Having referred to some of the judicial and academic commentary on the effect of the Act of 1877, Hogan J. pointed out that, in over one hundred and thirty five years (and as of now, one hundred and thirty eight years) of jurisprudence since the passing of the Act of 1877, there is no authority for the proposition that the Court might refuse to award damages for breach of contract or in tort on discretionary grounds, such as undue delay per se or because the claimant has been guilty of bad faith, even though these would be well established grounds for refusing any equitable relief which might otherwise have been granted. His conclusion was that, while the two systems of law (that is say, common law and equity) work evermore closely together and draw mutual inspiration from each other, the two systems “are not yet fused”. In consequence, the doctrine of laches has, as such, no application to a claim at common law for damages for breach of contract where that claim is not otherwise barred by the Statute of Limitations. I respectfully agree with that conclusion. It follows that, if the claim by Mr. McGrath in the first plenary action was for damages for breach of contract and that claim was not statute-barred, a finding of laches would not preclude Mr. McGrath from pursuing the claim for damages for breach of contract.
35. Returning to the decision in Duggan v. Allied Irish Building Society, I consider that the identification of “the provisions of the Judicature Acts” as the solution to the problem there is misconceived. It must be borne in mind that the plaintiff there sought two alternative remedies: specific performance; and damages for breach of contract. It was held that he was not entitled to specific performance, because of the nature of the contract he sought to enforce, being a contract in respect of which specific performance is not granted. The reference to the Judicature Acts is made in the context that what Mr. Duggan was seeking was damages in lieu of specific performance. However, his alternative claim was for damages for breach of contract and, moreover, it was held by Finlay J. that the defendants had been guilty of breach of contract and that Mr. Duggan was entitled to damages for that breach. The effect of the Judicature Acts was that Mr. Duggan could pursue a claim in equity for specific performance, which, if wrongdoing was established on the part of the defendant, might, depending on the exercise by the Court of its discretion under Lord Cairn’s Act, give rise to an entitlement to damages in lieu of specific performance and, as an alternative, as he did, he could pursue a claim for damages for breach of contract at common law, and he could pursue both claims in the same Court, as he did, that is to say the High Court.
36. As the Judicature Acts do not supply the solution to the problem, it is necessary to revert to s. 2 of Lord Cairn’s Act and to consider its application on the facts here. The first question which arises, again by reference to the first plenary action, is whether in that action the High Court had jurisdiction “to entertain an application . . . for the specific performance of” the contract for sale entered into between Mr. Stewart and Mr. McGrath. In my view, the answer is that it had, because the contract was a contract for the sale of land. Accordingly, by virtue of s. 2, the Court had jurisdiction to award damages in lieu of specific performance, if it was appropriate for the Court to think it fit that it should do so. In a situation where the Court has determined that laches on the part of the plaintiff purchaser, as here, should operate as a bar to entitlement to an order for specific performance, it is difficult to see how the Court could think it fit to award damages in lieu of specific performance. The situation in which the Court refuses to make an order for specific performance in favour of a plaintiff purchaser because laches on the part of the plaintiff purchaser has been established is wholly different from a situation in which there is no finding that the plaintiff has been guilty of laches but the Court may think it fit to grant damages in lieu of specific performance, rather than specific performance. One example which is pertinent in the context of this case is the situation which arose in White v. McCooey referred to earlier, where it was found that there was delay but it was insufficient to establish the defence of laches, but the Gannon J. determined, in accordance with his discretion, that the plaintiff would be confined to a remedy in damages. In this case, the trial judge, having refused to make an order for specific performance because it would be unequitable to do so on the ground of laches, in my view, should also, for the same reason, have refused to award damages in lieu of specific performance.
37. Of course, as outlined earlier, it is an entitlement to damages for breach of contract which counsel for Mr. McGrath and the second respondent now argues on behalf of his clients. The question which remains is whether that argument can succeed. In my view, it cannot. The pleadings in the first plenary action have been outlined in some detail earlier to demonstrate the relief the plaintiff was seeking. The plaintiff, Mr. McGrath, was seeking specific performance or damages in lieu of specific performance, as was the case in Holohan v. Ardmayle Estates. His case was that the contract was in being. Nowhere was it alleged that he was entitled to damages for breach of contract and no basis for assessing such entitlement or for measuring the damages, if such entitlement existed, was pleaded. The trial judge approached the quantification of damages entirely on the basis that the damages awarded were damages in lieu of specific performance. The quantification of damages for breach of contract would, in all probability, not be the same. As was recognised by this Court in Duffy v. Ridley Properties Limited [2008] 4 I.R. 282, the general rule is that damages for breach of contract should be assessed at the date of the breach. On this appeal, it is not open to Mr. McGrath and the second Respondent to seek to pursue a claim which was not made or pleaded at first instance and, accordingly, the argument advanced on their behalf must be rejected. On this point I have had regard to the principles outlined in Delany and McGrath on Civil Procedure in the Superior Courts (3rd Ed.) at para. 22 - 79 to 22 - 83. I am satisfied that for this Court to find that in this case there is an exception to the general principle that this Court should not hear and determine an issue which has not been tried and decided in the High Court is not justified, because to so find is clearly not required in the interests of justice.
38. In the interests of clarity, I would reiterate that it appears from the judgment in Duggan v. Allied Irish Building Society that the plaintiff in that case did claim damages for breach of contract, so that that authority is distinguishable from the position here. The decision in Holohan v. Ardmayle Estates is also distinguishable because the Supreme Court treated the award of damages in that case as damages in lieu of specific performance in circumstances where the Court had jurisdiction to make such an order for specific performance.
Summary of conclusions
39. The only issue which, in my view, it is appropriate for this Court to consider on this appeal is whether the trial judge was entitled to make an award of damages in lieu of specific performance in favour of Mr. McGrath and the second Respondent in circumstances where he had found that Mr. McGrath and the second Respondent were not entitled to a decree of specific performance in either plenary action, because Mr. Stewart had established laches on their part. On that issue, I am of the view that the trial judge did not have jurisdiction to award damages in lieu of specific performance. As regards the argument advanced on behalf of Mr. McGrath and the second Respondent, that they are entitled to damages at common law for breach of contract, I consider that, as no such claim was made or pleaded in the High Court or considered by the trial judge, they cannot pursue such a claim on the appeal.
Order
40. I propose that there be an order allowing Mr. Stewart’s appeal and vacating the order of the High Court in both plenary actions awarding damages in lieu of specific performance and quantifying those damages.
41. Although not specifically addressed on the hearing of the appeal, apart from in the context of the measurement of damages, I think it appropriate to make some observations in relation to the deposits paid by the plaintiff purchasers under the contracts the subject of both plenary actions. The cheque referred to earlier in para. 2, which was sent to Mr. Stewart’s solicitors on 25th June, 1998, was dated 24th June, 1998 and it was made payable to “Stewart & Co. Solicitors”. It was in the sum of IR£7,500, IR£5,000 of which related to the deposits payable under the contracts in relation to 14 Rutland Street and 9 Summerhill Place. Those deposits, in accordance with Condition 5 of the general conditions in each of the contracts, were payable to Stewart & Co., as the vendor solicitors, as stakeholders. Assuming that the deposits have not been repaid, Mr. McGrath, as regards the 14 Rutland Street contract, and Mr. McGrath and the second Respondent, in relation to the 9 Summerhill Place contract, would appear to be entitled to repayment of the deposits so paid, even if, as seems likely, they have not been demanded. However, apart from making those observations, I do not consider it appropriate for this Court to take any further action in relation to the deposits.
