Supreme Court: Trial judge did not have jurisdiction to award damages in lieu of specific performance concerning sale of Dublin properties

About this case:

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PJ and Thomas McGrath as purchasers, sued Derek Stewart as vendor, for specific performance of two contracts, each of which was for the sale of property. In the High Court, the McGrath’s had succeeded in their claim for damages in lieu of a decree of specific performance. Delivering the judgment of the Supreme Court, Justice Laffoy stated that apart from the fact that each of the contracts related to a different property, there was ‘very little difference between the two contracts in issue and between the factual basis, the pleadings and the procedural process in both actions’ – therefore it was possible to outline the background to the appeal by reference to the first action.

Specific performance

The contract was 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 Mr. Stewart as vendor, and P.J. McGrath in trust, as purchaser, for the sale of 14 Rutland Street in the City of Dublin at the price of IR£25,000.

The relevant features of the contract were:

(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 contract at issue in the second action – for 9 Summerhill Place – was on similar terms, and the contracts were being finalised at the same time.

On 25th June 1998, the McGrath’s solicitors returned the contracts for Rutland Street and for Summerhill Place to Mr Stewart’s solicitors together with a cheque, which covered the deposit on both transactions and also requisitions on title.

Neither sale was completed, and Justice Laffoy indicated that on 23rd May 2000; the last item of correspondence was a letter of from the McGrath’s solicitors, noting desire to close the sale.

There was no response received to the letter, and nothing happened after that for over four years.

On 11th June 2004 McGrath’s solicitors served a notice to complete on Mr Stewart requesting 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 the McGrath’s, as purchasers, would elect to pursue remedies available under the contract.

The notice to complete was not complied with and the plenary actions were initiated in July 2004, in which the McGrath’s sought specific performance and damages.

Damages in lieu of a decree of specific performance

In November 2008, the High Court refused the McGrath’s claim for a decree of specific performance of the contract for sale, awarding damages in lieu of a decree of specific performance. Accordingly, the Court assessed the damages in the sum of €141,589.61.

According to Justice Laffoy, the only issue appropriate for Supreme Court to consider on this appeal was whether the trial judge was entitled to make an award of damages in lieu of specific performance in favour of the McGrath’s in circumstances where he had found that they were not entitled to a decree of specific performance in either plenary action, because Mr Stewart had established laches on their part.

Justice Laffoy held that the trial judge did not have jurisdiction to award damages in lieu of specific performance, and since the McGrath’s had not advanced the argument for damages at common law for breach of contract in the High Court, they could not pursue such a claim on the appeal.

Order

While allowing Mr Stewart’s appeal and vacating the order of the High Court awarding damages in lieu of specific performance, Justice Laffoy ordered that the McGrath’s were entitled to repayment of the deposits paid on 25th June 1998, even if they had not been demanded or specifically addressed in the appeal.