Samuel Mateer and Frances Mateer (plaintiffs) v Dublin City Council (defendants)
Equity - Application for specific performance - Whether the documents relied upon recognised the existence of a concluded and enforceable agreement - Whether requirements of sale by way of lease satisfied - Whether doctrine of part performance could be invoked - Statute of Frauds (Ireland) Act 1695 s.2
The Circuit Court (Mr Justice Smyth); judgment delivered January 23rd, 2006.
An intention to create an enforceable contract can only be ascertained from the words used in the documents concluded by the parties. Words contained in a concluded document which are inconsistent with the existence of a concluded agreement prevent the documentation from being accepted as a sufficient memorandum or note of an agreement for sale in accordance with the provisions of s.2 of the Statue of Frauds. The requirements of a sufficient memorandum or note of an agreement must be satisfied to claim specific performance.
The Circuit Court so held in dismissing the plaintiffs' claim.
James Macken, SC, and Helen Boyle, BL, for the plaintiffs; George Brady, SC, and Carol O'Farrell, BL, for the defendants.
Mr Justice Smyth commenced by stating that the claim was for, inter alia, specific performance of what the plaintiffs claimed to be a written contract for the sale of land, namely the premises known as 46 O'Rahilly House, Ringsend, in Dublin for the sum of IR£5,800. In or about 1988, the first named plaintiff, became aware, as a result of a notice from the defendants, that he was eligible to apply to purchase his flat under the terms of a Dublin Corporation scheme for the sale of flats and maisonettes to tenants. The plaintiff completed an application form together with a second form giving details of the persons living in the flat and their income. Both forms were signed by the first named plaintiff on December 5th, 1998, and returned to the defendants. Subsequently, the plaintiffs were furnished with a certificate, dated December 10th, 1990, which certified the first named plaintiff had been a tenant of their premises since August 1981. The plaintiffs received a letter dated December 18th, 1990, from the defendants, including an attached form to be completed by the plaintiffs which stated "if you are interested in purchasing at the price and repayments quoted . . . complete and return the attached form". The defendant's letter referred to the plaintiffs' application to purchase their dwelling and set out a sale price calculated in accordance with the defendants' sale scheme of corporation flats to tenants. The gross sale price was set at IR£15,600 i.e market value and, after appropriate deductions, the net sale price was fixed at IR£5,800. The maximum repayment was to be 30 years, repayable as a weekly annuity at 9 per cent per annum, being IR£10.49 per week. In addition to the repayment annuity, provision was also made for a charge to cover the defendants' costs of cleaning and maintaining common areas in the flat complex. There was also provision that fire insurance was to be payable in a combined weekly payment. The letter concluded that "all negotiations and any agreement . . . shall be deemed to include a condition that the Corporation shall not be bound until statutory approval of the City Council has been obtained".
On January 16th, 1991, the plaintiffs completed the form providing for joint purchase in both of their names. The form recited, inter alia, that the plaintiffs were willing to purchase their dwelling from the defendants for the net sale price of IR£5,800. The form further recited:
"I understand and accept that no warranty will be given by the Corporation in relation to the condition of the dwelling, that there will be no obligation on the Corporation to put the dwelling into good structural condition and that it is my responsibility to satisfy myself as to its condition. I also understand and accept that I have no right of appeal to the Minister for the Environment and that the future maintenance and repair of the dwelling is my responsibility. Please submit my offer to the City Council in accordance with s. 83 of the Local Government Act as amended . . . I accept that the Corporation must be satisfied that my income is sufficient to meet the outgoings on the dwelling before the completion of the sale".
The completed form was returned to the defendants. The plaintiffs heard nothing further until 1995 when they received a letter stating that the defendants was not proceeding with the scheme. The defendants acknowledged that the decision would be a matter of acute disappointment to many potential purchasers whose legitimate expectations of home ownership would be dashed. The reason given for not proceeding with the scheme, was that there would have been an unacceptably high risk that a significant number of purchasers would end up with flats that they could not sell, with service charges and refurbishment bills that they could not afford, and with unsatisfactory arrangements for management and maintenance. There were also legal difficulties involved in proceeding, specifically no managerial order had been signed and no council resolution had been passed in relation to the scheme. Mr Justice Smyth said that as far as the plaintiffs were concerned at the time, once they had a completed and returned the attached form they believed that they had a completed contract, and all that remained to be done was to pay the deposit or the full price and await completion of the sale.
Mr Justice Smyth said that the plaintiffs had claimed IR£8,500 for improvements which they said they carried out on foot of the alleged agreement. The evidence was that all of the improvement works were completed by 1993. In the course of the evidence, issues such as the amount of the sinking fund that would be necessary to cover future repairs and maintenance; the issue of insurance and estimates of the anticipated cost per tenant purchaser, of a weekly service charge, were addressed as well. Various experts were called by the plaintiffs and it was conceded that a figure for the service charge for the plaintiffs' block could be in excess of €1,000 per annum per apartment, although this view depended to some extent, on who would have the responsibility for replacing windows.
Counsel for the plaintiffs submitted that the plaintiffs were given an opportunity to buy their flat from the defendants. They filled in an application form and, subsequently, an exchange of standard documents followed. The final document in the series of documents, consisting of two pages, was sent to the plaintiffs in December, 1990. It was submitted that these two pages should be read together. The first page contained the offer that if they wished to purchase at the price and terms set out on the first page, they could do so by completing page two. It was submitted that the words "please submit my offer" had to be read in the light of the whole document and that once the final document in the series was received by the defendants it constituted a completed application by the plaintiffs to purchase their flat. Counsel referred to the letter informing the plaintiffs of the defendants' decision to cease going ahead with the scheme. This letter referred to the plaintiffs' "application to purchase" and noted that the decision would come as a disappointment to those "whose legitimate expectations of home ownership had been dashed". Mr Justice Smyth stated that too much weight could not be attached to this letter. The letter did no more than refer to the application to purchase the flat. The reference to legitimate expectation was not a ground of relief sought in the proceedings and, in any event, being a matter of public law, did not come within the jurisdiction of the Circuit Court. In this case the main relief sought by the plaintiffs was for a decree of specific performance. Mr Justice Smyth stated that the plaintiffs' argument was, as he understood it, that this was a situation in which there was a statutory scheme in place which enabled corporation tenants to purchase their flats. There was a standard procedure to facilitate this. The defendants drafted the forms and nearly all the blanks on those forms were filled in by them. Accordingly, once the plaintiffs had completed and returned the final form this constituted the acceptance of the offer contained in the document of December 18th, 1990. This was because it was the final document in a series of documents, irrespective of the words "please submit my offer". It was submitted that there was a sufficient note or memorandum to satisfy the provisions of s.2 of the 1695 Act. Therefore a binding contract of sale existed between the parties.
Counsel for the defendants submitted that the documentation relied on was not a sufficient note or memorandum to comply with the provisions of s.2 of the 1695 Act and as a consequence any alleged agreement was unenforceable. It was submitted that the words "I am willing to purchase, please submit my offer" contained in the documents were fatal to the plaintiffs' contention that there was a completed and enforceable contract. On its face this could not be regarded as an acceptance. Furthermore the letter dated December 18th, 1990, amounted to no more than an invitation to treat.
Mr Justice Smyth said that it was common case that the sale was to be by way of lease. What was not entirely clear was what the maximum period of the lease would have been. The answer appeared to be that what was to determine the duration of any lease was the age of the flat. Counsel for the defendants submitted that the significance of this being that the duration of a lease and its commencement date are material terms and there must also be agreed or be capable of being produced to certainty. In his evidence the first named plaintiff agreed that he had not discussed the duration of the lease or the rent that would be payable under it with the defendants; nor did he have any discussion as to the commencement date of the lease.
Mr Justice Smyth considered the case of Igote Ltd v Badsley Ltd 4 IR 511. This authority considered the nature of what it is legitimate to have regard to in the construction of a document. It seemed clear to Mr Justice Smyth that in the light of that authority that when he came to construe the documents he must deduce the intention of the parties from the actual words of the document itself. As May LJ said at p.374 in Plumb Brothers v Dolmac Agriculture Ltd 271 EG 373:
"The contract between the parties is what they said in the relevant document. It is not for this or any court to make a contract for the parties different from the works that the documents actually uses merely because it may be that the parties intended something different."
In this context, Mr Justice Smyth drew attention to the decision in Mulhall v Haren IR 364. This was a case which involved the "topical issue" of the phrase "subject to contract". It was held that the phrase "sale is subject to contract" in an initial letter was inconsistent with a recognition of a concluded agreement between the parties and prevented that letter and subsequent connected documents from constituting sufficient memorandum or note of the agreement for sale in accordance with s.2 of the 1695 Act. The court also held that the documents failed to comply with the requirements of the section because they failed to record a material term of the agreement i.e. the day on which the possession of the property was to be given to the plaintiffs. Mr Justice Smyth said that the cases of Kearns v Manning IR 869 and McQuaid v Lynam IR 564 reflected the well-established principle that the precise date for the commencement of a lease must be specified and that its duration must be certain from the outset.
Mr Justice Smyth said that the defendants submitted that the initial correspondence was no more than an invitation to the plaintiffs to apply to be allowed to purchase the flat. It amounted to an invitation to treat and was not a concluded offer and acceptance which would constitute an enforceable contract. Mr Justice Smyth stated that an offer is really a clear and unambiguous promise or undertaking by one party. In this context, it was important to bear in mind, that an invitation to treat is not an offer. Mr Justice Smyth referred to the case of Carlill v Carbolic Smokeball Company 1 QB 256 where Bowen L.J. said:
"It is not like cases in which you offer to negotiate or you issue advertisements . . . in which case there is no offer to be bound by any contract. Such advertisements are . . . offers to receive offers."
Mr Justice Smyth stated that in this case the documentation could hardly be described as an advertisement in the way that that word is normally used. It was pertinent however, to ask whether what it amounted to was an offer to receive an offer. Mr Justice Smyth considered Gibson v Manchester City Council 1 All ER 972 a case with similarities to the present one. The House of Lords, on appeal, held that letters stating that the council "may be prepared to sell" and inviting the respondent "to make formal application to buy" were not an offer to sell but merely an invitation to treat and specific performance could not be granted. Mr Justice Smyth then considered the case of O'Mahony & O'Mahony v The Lord Mayor, Alderman and Burgesses of Cork (unreported, Circuit Court, June 19th, 1997). This was a case with a similar background to the instant one. However there was a critical difference between the plaintiffs' predicament in the O'Mahony case and the facts in the instant case. The terms in the letter of offer, relating to a tenant purchase scheme, from Cork Corporation did not contain any qualifications. Mr Justice Smyth noted that there had been no difficulty in deciding that the Cork Corporation letter was an unambiguous offer letter. The sequence of documents had constituted a note or memorandum sufficient to satisfy the 1695 Act and there was an enforceable agreement. Mr Justice Smyth thus distinguished O'Mahony on its facts from the instant case as there did not appear to have been any dispute that the corporation letter did not in fact constitute an offer. Judge Buckley in the O'Mahony case went on to say that if there was not compliance with the Statute of Frauds, he was satisfied that the doctrine of part performance applied in the case because the works done by the tenant related to the existence of the contract in the terms of the offer documentation. Alternatively, Judge Buckley held that if he was wrong to conclude that there was a binding contract in existence, he was satisfied that there was a duty owed to the tenants when offering to sell the flats to ensure that the sale arrangements were feasible and could be implemented within a reasonable time.
Mr Justice Smyth stated the real point in the case was whether the documents relied on by the plaintiffs recognised the existence of a concluded and enforceable agreement for the sale by the defendants to the plaintiffs of the flat they were occupying as corporation tenants at the time. For the plaintiffs to obtain a decree of specific performance they needed to satisfy the requirements of the Statute of Frauds by proving the existence of a sufficient memorandum or note of the agreement. In that regard, a memorandum or note cannot satisfy the statute, if, when it is read alone or with other documents which can properly be read with it, it does not contain a recognition expressed or implied of the existence of the oral contract sought to be enforced. It was clear that the circumstances surrounding the exchange of documentation between the parties in the case was the existence at the time of a scheme enabling corporation tenants to purchase their flats. The advertising of that scheme and the standard form of documents exchanged in relation to it clearly reflected an intention to implement the scheme on the part of the defendants. Mr Justice Smyth stated that while that may well reflect the subjective intention of the defendants, that intention could not be ascertained merely from the existence of the scheme itself but only from the documents concluded by the parties and the actual words used by them. Mr Justice Smyth stated that, having considered the relevant authorities, that the words contained in the plaintiffs reply or final document, namely "please submit my offer to the City Council . . ." were inconsistent with the existence of a concluded agreement and therefore prevented the documentation from being accepted as a sufficient memorandum or note of an agreement for sale in accordance with the s.2 of the 1695 Act. Furthermore the provision in the standard form reply completed by the plaintiffs, accepting that the defendants must be satisfied that the plaintiffs income be sufficient to meet the outgoings on the dwelling before the completion of the sale, was supportive of that conclusion. Mr Justice Smyth stated that given the evidence, it was not unreasonable for the defendants to be satisfied that the income of a tenant purchaser would adequately meet the costs of future charges. Since neither the commencement, nor the duration of the lease, had been agreed (both of which are essential material terms of a lease) there was never a valid and enforceable contract for sale of the flat to the plaintiffs. In all the circumstances, the documents relied on by the plaintiffs as constituting an enforceable contract were more likely a step in the negotiations for a contract that, owing to the unfortunate change of heart on the part of the defendants, never reached fruition. Undoubtedly the plaintiffs spent money in making improvements to their flat on what they believed to be a valid contract for sale. However, before the doctrine of part performance can apply a court requires evidence, by parol or otherwise, that there was a contract certain and definite in its terms.
Mr Justice Smyth concluded that in all the circumstances he
must dismiss the plaintiffs' claim.
Solicitors: Guilfoyles (Cork) for the plaintiffs; Law Agents
for the defendants.
Martin McDonnell, barrister