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O'Connor v. Coady [2003] IEHC 77 (12 November 2003)

 
THE HIGH COURT

RECORD NO. 556 SP 2002

IN THE MATTER OF THE VENDOR AND PURCHASER ACT, 1874 SECTION 9

BETWEEN/

MARY O'CONNOR

PLAINTIFF

AND PATRICK COADY

DEFENDANT

Judgment of Justice Carroll delivered the 12^th day of November, 2003.

The plaintiff, (referred to as the vendor) and the defendant, (referred to as the purchaser), entered into a contract for the sale of land following negotiations on 31^st May, 2001 for £450,000. A deposit of £45,000 was paid.

Clause 3 provided:

"The contract herein is subject to the purchaser, his servants or agents obtaining final grant of planning permission for the residential development applied for by him, his servants or agents, on the property at sale herein and after conclusion of all appeals (if any) within four months of the date hereof."

Clause 6 provided:

"The closing date herein shall be seven days after the issue of the final grant of planning permission referred to in special condition 4 above." (actually 3).

Planning permission was not obtained within four months of the date of the contract. The planning permission applied for concerned other lands as well as the lands in question.

The vendor's solicitor wrote to the purchaser's solicitor on 23^rd August, 2001, noting that they had not heard in relation to the planning permission and asking them to revert to advise the status thereof and as to when their client expected to be in a position to complete the transaction.

On 3^rd September, 2002 the defendant's solicitor wrote to say planning permission issued in June. However, an appeal was lodged and the hearing would be in September or October. He said his clients were confident that the appeal would not cause difficulty and to enable completion he asked them to reply to requisitions on title sent on 26^th June, 2001 and confirm that the draft title deed was approved.

The purchaser's solicitor replied on 12^th September, 2002, saying they were surprised at the contents and said:

"As you are aware, under the terms of the contract, this contract has lapsed and is at an end."

Without prejudice they offered to renegotiate terms for the sale of the property. They said they returned the deposit in the sum of €57,138.21 (equal to £45,000). In fact a cheque was not enclosed but was forwarded later.

The defendant's solicitor replied on 18^th September, 2002, calling on the purchaser to confirm that she would proceed with the sale. They said that they expected a favourable decision of An Bord Pleanála to issue on 3^rd October, 2002 and expected to complete the purchase as soon as possible thereafter. By a letter dated 4^th September, 2002 the vendor's solicitor refused to accept the return of the deposit. The purchaser's solicitor wrote on 11^th October, 2002 confirming that the decision of An Bord Pleanála was received on 8^th October, 2002 and that the purchaser now wished to complete. On 21^st October, 2002 in pursuance of Clause 40 of the General Conditions of sale, the purchaser's solicitor called on the vendor to complete the sale within 28 days of the date thereof.

There are affidavits dealing with communications between the solicitors for the parties and also between an associate of the purchaser and the vendor's husband. There is a conflict of evidence which cannot be resolved on affidavit.

However I am satisfied that these communications do not impinge on the legal issues to be decided in this matter.

The vendor submitted firstly that the condition about planning permission was a condition precedent, in which case no contract came into existence.

However, case law supports the view that a condition providing that the contract is subject to planning permission is a condition subsequent. (See Healy v. Healy Kenny J., Unreported, 3^rd December, 1973; International Securities Ltd. v. Portmarnock Estates Ltd. Hamilton J., Unreported, 9^th April, 1975; Wylies Irish Conveyancing 2^nd Ed., para. 7.16). Accordingly I hold that the condition was a condition subsequent and not a condition precedent.

It is not disputed that the planning permission referred to in the contract is the final planning permission given by An Bord Pleanála. Also, it is not disputed that the clause relating the planning permission was for the benefit of the purchaser and could have been waived by him.

The vendor submitted secondly that since the planning permission was not obtained within four months from the date of contract, the vendor was entitled to return the deposit and treat the contract at an end. While the word 'lapse' was used in correspondence, Mr. O'Dwyer for the vendor did not seek to argue that an automatic lapse occurred on 1^st October, 2001. He said that some unequivocal act showing the vendor treated the contract at an end was permitted prior to 3^rd October, 2002 because the planning permission did not issue until that date. He relied on the case of Sepia Ltd. and Opal Ltd. v. M & P Hanlon Ltd. and Seaborn Ltd., [1979] I.L.R.M. 11. He said no written variation of the terms of the contract had been agreed.

The purchaser on the other hand, says the closing date was not expressed to be of the essence therefor the vendor would have to serve a completion notice fixing a new closing date giving reasonable time to complete. If the purchaser failed to obtain planning permission within the time limited and also failed to waive the clause about planning permission, as he would have been entitled to do, only then the vendor would be entitled to rescind. The purchaser also relied on Sepia Ltd., and Anor. v. M & P Hanlon Ltd., and Anor.

In my view, the law outlined by Costello J. in that case is directly applicable to this one.

In the Sepia case, there were two contracts for two separate parcels of land. The first contract was expressed to be subject to obtaining planning permission, and also time was of the essence in relation to the closing date fixed. The second contract altered the first contract by providing the closing date for both sales to be either of two specified dates. Time was not made of the essence. Costello J. gave his conclusions on the construction of the two contracts at p. 24 of the report. I quote:

"1. In the first contract the parties had expressly made time of the essence of the contract when they provided that the sale was to be closed on 1^st May, 1975. Condition 11 relating to planning permission must be interpreted in the light of the necessity strictly to observe the date set for closing. The result is in my opinion that if the plaintiffs had failed to obtain planning permission by 1^st May, 1975, and if the closing date was not extended by mutual agreement, then the defendants were entitled to treat the contract as at an end if the plaintiffs refused to complete: the absence of planning permission would not have excused the non-performance by the plaintiffs of the contract.

2. The second contract of 16^th May did not make time of the essence of the contract in relation to the sale of block B and when it amended the closing date of the first contract it did not provide that in respect of the new closing date, time was to be of the essence of the contract. In addition it would be observed that the two sales were to be closed simultaneously. It was not in my opinion, the intention of the parties that time was to be of the essence of the first contract but not of the second contract. The result was that two possible closing dates in respect of both sales were agreed to but time was not made of the essence of the contract in respect of either sale.

3. The second sale was not made subject to planning permission being obtained but the first sale remained subject to special condition 11. The result of the amendment of the first contract was that if the plaintiffs were in default in closing the sales on either of the dates specified, then the vendors could serve a notice making time the essence of the contract and fixing a reasonable time for the completion. If time was made the essence of the contract and the period for completion given a reasonable one, then the position at the expiration of the notice would be this. If planning permission had then been obtained the plaintiffs were bound to complete both sales. If planning permission had not been obtained, then the plaintiffs could waive this provision of the contract (for reasons given in the next succeeding contract) and complete both sales. If, however, the plaintiffs did not waive special condition 11 then the first contract would come to an end at the expiration of the notice (the condition relating to planning permission not having been complied with), (see Smith v. Butler [1900] 1 Q.B. 695; Aberfoyle Plantation v. Cheng [1960] AC 115)."

The remainder of the conclusions are not relevant.

In my view the construction given by Costello J. to the first contract must equally be applied to the contract in this case. Time was not made of the essence of the contract when the closing date was fixed. After the purchaser was in default in closing the sale on the day fixed, then in order to bring finality to the contract the vendor would have to serve a notice making time of the essence of the contract under clause 40 of the general condition of sale. At the end of the period of 28 days provided for in clause 40, if planning permission had been obtained, the purchaser was bound to complete. If planning permission had not been obtained, the purchaser could waive the provision and complete the sale. If the purchaser did not waive the condition then the contract would come to an end at the expiration of the notice.

The vendor was not entitled to say in this case that the contract was at an end and return the deposit, just because the planning permission had not then come through within the time limited by the contract.

It was essential that a completion notice under Clause 40 of the General Conditions be served, and that the time fixed by the notice should have elapsed without completion, before the vendor could treat the contract as at an end.

In one of the cases cited, McKillop and Anor. v. McMullan (1979 N.I. 85) it was held that a condition relating to planning permission created a condition precedent (with which I do not agree) but went on to further hold that the vendor, by insisting on performance of the contract after the completion date, had made a qualified waiver of the condition but did not lose his right to insist on fulfilment of the condition. He was entitled to fix a new date specifying a reasonable time. Since the vendor purported to return the deposit and failed to give such notice, it was held that was ineffective to avoid the contract. This case is similar to the present one in that no attempt was made to fix a fresh date for closing.

Mr. O'Dwyer for the vendor said it was unfair that the purchaser should be given a chance to "mend his hand" as he put it. But Clause 40 of the General Conditions works both for the vendor and the purchaser. The vendor at any time after the closing date could have served a completion notice under Clause 40 of the General Conditions. It was then up to the purchaser to decide if he wanted to waive the clause making the sale subject to planning permission. If he did not want to do so, the vendor could then have treated the contract as at an end.

The issues set out in the amended special endorsement of claim are as follows:

1. Was the plaintiff entitled to rescind the contract dated the 31^st May, following the failure of the defendant to comply with the special condition on obtaining planning permission by 30^th September, 2001?

2. Did the plaintiff in fact validly rescind the said contract of 31^st of May, 2001?

3. Was the plaintiff under the said contract entitled to regard the said contract as being at an end when the provisions in relation to the obtaining of planning permission within the time limit prescribed were not complied with in that the planning permission did not issue?

4. Was it incumbent upon the plaintiff being the vendor under the said contract to notify the defendant being the purchaser that the contract was at an end?

5. The said contract being conditional upon the said issue of planning permission did the plaintiff, being the vendor under the same, either expressly or by implication do any act or thing as would have indicated to the purchaser that they were waiving the requirement of compliance with the said condition or otherwise indicating that she was treating the said contract as unconditional?

6. Was the defendant, being the purchaser under a conditional contract, entitled to assume in the absence of the said condition being fulfilled as therein provided that the plaintiff being the vendor had waived the said condition or that the contract had otherwise become unconditional or otherwise unenforceable?

7. Is the defendant entitled to register the said caution in the Land Registry?

The answers to those questions are as follows.

1. The plaintiff was entitled to rescind the contract following the failure of the defendant to obtain planning permission by 30^th September, 2001, provided she served a completion notice under Clause 40 of the General Conditions of Sale and if the defendant failed to comply with the notice.

2. The plaintiff did not in fact validly rescind the contract of 31^st May, 2001.

3. The plaintiff was not entitled to regard the contract as being at an end when the planning permission was not obtained within the time prescribed by the contract.

4. The plaintiff was not entitled to notify the defendant that the contract was at an end when planning permission was not obtained within the time prescribed by the contract.

5. & 6. The plaintiff did not indicate to the defendant that she was waiving the requirement of compliance with the condition relating to the issue of planning permission. It was the defendant who had the right to waive this condition not the plaintiff. The contract did not become unconditional or otherwise unenforceable.

7. Does not arise.