Title:	Courtney -v- McCarthy
Neutral Citation:	[2007] IESC 58
Supreme Court Record Number:	70/07
High Court Record Number:	2005 3000 P
Date of Delivery:	12/04/2007
Court:	Supreme Court
Composition of Court:	Geoghegan J., Kearns J., Finnegan J.
Judgment by:	Geoghegan J.
Status:	Approved
Result:	Allow And Set Aside
Judgments by Link to Judgment Concurring Geoghegan J. Link Kearns J. Finnegan J. Link

Although this litigation, on its face, relates simply to a contract for the sale of land, unusual issues of both fact and law arose. The plaintiff/respondent was the vendor and the defendant/appellant was the purchaser. For convenience I will refer to them as “the vendor” and “the purchaser” respectively. The vendor’s proceedings were with a view to establishing that she had lawfully rescinded the agreement. The appellant in her defence denied rescission and sought specific performance. In reality, however, the denial was artificial as undoubtedly the agreement had become rescinded at the suit of the vendor but the purchaser’s claim for specific performance was based on an alleged estoppel which allegedly arose from a set of circumstances which took place after the date of the purported rescission. The learned trial judge in the High Court granted the vendor her relief sought and dismissed the purchaser’s counterclaim. The purchaser has appealed that decision.

The sale related to lands with a development potential situate at Rocky Road and Ballybeg Road, Ennis in County Clare. The purchaser’s father owned adjacent property and was a developer of some substance. The sale had been a sale by public auction. The signed memorandum incorporated the then standard Law Society contract with some special conditions included in it. Some matters relating to planning and development and some matters relating to access which were partly covered by the special conditions were of considerable interest to the purchaser and although she signed the contract, as it stood, she attempted afterwards with the help of her solicitor to have certain aspects of these matters agreed. For reasons which I will explain, I do not find it necessary to give details. They are, at any rate, more fully dealt with in the judgment of Finnegan J.

The agreed closing date was the 8th April, 2005 and it is pleaded in the statement of claim that pursuant to general condition 40 of the contract by a notice dated the 22nd April, 2005 twenty eight days were given for completion and that period elapsed without the sale being closed. The statement of claim goes on to plead that the vendor thereupon forfeited the purchaser’s deposit on the 30th May, 2005 and effectively rescinded the agreement.

There were then further attempts made at the suit of the purchaser but partly also with the connivance of the vendor to revive the agreement on a without prejudice basis and with some side agreements about the matters of special concern to the purchaser.

It seems absolutely clear that the rescission by the vendor was lawful and it seems equally clear that until the events which I am about to describe and which form the factual background of these proceedings took place, all other attempts to revive the agreement on a without prejudice basis or otherwise had become redundant. I do not, therefore, find it necessary to elaborate further on them.

Events took a sudden turn however on the 4th July, 2005. On that date the auctioneer, Mr. Fitzpatrick, received a telephone call from the daughter of the vendor. The daughter is the same name as the mother i.e. Anne Courtney. It appears that the vendor is frail and elderly and everything to do with the sale was being managed on her behalf by her said daughter who in turn was married to her solicitor, Mr. Michael Hickey. Mr. Fitzpatrick in evidence gave an account of this call from contemporaneous notes which he took. According to the transcript, Mr. Fitzpatrick, referring to these notes, said the following:

“She prefaced it by saying that her mother was somewhat frustrated by the whole affair and the effect .. and was concerned about the effect it was having on her mother’s health. That was the general background. And she said in an effort to bring the matter to conclusion, she asked me to contact Therese McCarthy with a view to closing the sale on Monday 11th July. She specifically said to me she didn’t want to prejudice what was going on between the respective solicitors and she didn’t want any correspondence, she didn’t want me to enter into any correspondence in the matter.”

Interest was never a matter which concerned Mr. Fitzpatrick because of course it could only arise in the event of delay. The following dialogue, however, between Mr. Fitzpatrick and counsel for the purchaser took place towards the end of his cross-examination:

“Q. Was it your understanding that if this went ahead on the 11th, that was a matter to be dealt with by Mr. Fowler?

A. Yes, at closing, yes.

Q. With Mr. Fowler?

A. Yes. Sorry, I should say that when Anne Courtney rang me first on the 4th I was aware that she was on a family holiday in Kerry and that Michael Hickey was with her. I specifically asked who would deal with the closing .. (interjection).

Q. On the 11th?

A. In the office of John Shiel, yes I specifically … (interjection)

Q. Who was going to deal with her and you were told Mr. Fowler … (interjection)?

A. David Fowler, that’s according to my notes.

Q. Did you tell Ms. McCarthy that’s going to be dealt with by Mr. Fowler?

A. I did specifically … (interjection)

Q. You told her that?

A. Because I knew the first thing she would have to do would be get in touch with Colm Gavin’s office in Galway.

Q. Her own solicitor?

A. Yes.

Q. But mentioned it would be Mr. Fowler dealing with it?

A. Absolutely, I did.”

Having regard to the comprehensive review of the evidence given by Finnegan J. in his judgment and for which I am grateful, I intend to confine myself to the aspects of that evidence which are most relevant to this appeal. I think it of some importance, however, to list the witnesses who did in fact give evidence if only for the purpose of highlighting a major omission. The witnesses were:

Mr. Michael Hickey, solicitor for the vendor.

Ms. Anne Courtney junior, daughter of the vendor.

Mr. Michael Fitzpatrick the auctioneer.

Ms. Therese McCarthy the purchaser.

Mrs. Anne Courtney the vendor.

Mr. Michael Earley the relevant bank manager.

Mr. Colm Gavin, solicitor for the purchaser.

When I describe what happened on the 11th July, 2005, it will emerge that Mr. David Fowler a partner of Mr. Hickey was a key figure. Yet, although it appears from the transcript that he was present in court, he was not called as a witness.

I turn now to the key evidence of Mr. Gavin. Mr. Gavin explained that he received the instructions from his client, the purchaser, relating to the offer conveyed to her by Mr. Fitzpatrick in early July, 2005. He had been out of the office until Thursday, 7th July and therefore received them on that date. Early the following morning he contacted the office of the vendor’s solicitors which was a Dublin firm. He was told that Mr. Hickey was on holidays and he then asked for Mr. Fowler but he was told that Mr. Fowler would not be there that day. He told the telephonist that he would ring back on the Monday but that the matter was extremely urgent. When asked what did he understand was going to happen on Monday, 11th July, he said that he understood that the sale was to be completed. These were the instructions given to him by the purchaser. He interpreted his instructions as meaning that the sale was to be completed in accordance with the terms of the original contract. That, of course, was a correct interpretation if Mr. Fitzpatrick’s evidence was to be accepted and there was no reason to dispute it. When asked about the side problems such as access on to the lands etc., he answered as follows:

“Well, my understanding with regard to it; the site seemed to be fraught with problems as far as I could see. The original contract was a little loose with regard to how the access and things were to be. But whatever I was being offered on the day, on Monday, I would have to accept. That was as far as I was .. and that is what I informed my client. Whatever we were getting we had to take, that was it.”

There appears never to have been any dispute as to how interest was to be calculated which might have been a different matter. The problem was a financial one and the purchaser was hoping to escape interest or at least escape part of it. But I think it is perfectly clear that she was well aware that under the contract, the liability to pay interest existed and she was equally well aware that what had to be performed was the contract as originally entered into.

As far as the side issues were concerned the evidence would seem to clearly establish that for the purpose of any closing that might occur on the 11th July they were not regarded as part of the contract except in so far as there were special conditions relating to them. Some of the obligations in the special conditions were, at any rate, post completion obligations.

The narrative as to what exactly happened as and from Monday, 11th July, 2005 is crucial to the outcome of the case. I will now explain it in detail.

I will do so primarily by reference to the evidence of Mr. Gavin and I will refer briefly to any relevant conflicting evidence from Mr. Hickey. First of all I should mention that there was evidence from Mr. Gavin that he sent a fax to the firm of John Shiel, solicitors, on Friday, 7th July very shortly after he had telephoned the office. It would, therefore, have been some time between 9.00 o’clock and 10.30 on the Friday morning. The fax read as follows:

“Dear Mr. Fowler,

I rang you on my return from a few days leave this morning but unfortunately you were not available. My client has instructed us that apparently this sale is now back on track and is to complete immediately. To this end, I have arranged with AIB to draw down the monies on Monday morning and it can be forwarded to you by draft of (sic) by electronic transfer.

You might ring me in order to bring this protracted matter to a conclusion.

Yours sincerely

Colm Gavin”

At about 11.30 on the morning of the 11th July, Mr. Gavin received a telephone call from Mr. Fowler. He explained to Mr. Fowler the urgency of the matter that he was putting the monies through anyway but Mr. Fowler told him that he was “caught in court” and that he could not deal with the matter at that time but that he could complete it the following day. Mr. Gavin agreed to this suggestion as he had no problem with it. As far as Mr. Gavin was concerned there was simply an extension and nothing more until the following day. He so informed his client. He did not then travel to Dublin. Despite the postponement, Mr. Gavin made it clear that he was still “putting the money through”. At that stage as far as Mr. Gavin was concerned and indeed as far as his client was concerned everything was on course for a closing of the sale in accordance with the contract on the following day, Tuesday, 12th July, 2005 until Mr. Gavin received a telephone call from Mr. Hickey at about 12.30 in the morning of the 11th. Mr. Hickey immediately said to him over the telephone “Why aren’t you here in my office to complete this transaction”? According to Mr. Gavin’s evidence, Mr. Hickey told him that he, his wife and his mother-in-law, that is to say, the vendor had travelled up from Kerry to complete the transaction on that day. Mr. Gavin then apologised but explained the position as he saw it but he was told by Mr. Hickey “it is too late now”. According to Mr. Gavin (though this was denied by Mr. Hickey) Mr. Hickey said that he wanted the money to go back with his mother-in-law to Kerry and indeed that that was the exact words he used. It emerged in the evidence that the vendor was not in Dublin at all. Mr. Gavin told Mr. Hickey that he was quite happy to release the money because he knew the documents he was going to receive. However, Mr. Hickey told him “It is too late, the sale is off”. That was the end of the conversation. On the same day, Mr. Gavin wrote the following to Mr. Hickey:

“Dear Mr. Hickey

Our telephone conversation refers. It is in order to release monies today, you may send on the documents to me. With regard to the right of way, the map has to be agreed between the parties. When same has been agreed, I should be grateful if you would have the grant of right of way executed.

Yours sincerely

Colm Gavin”

“Dear Sirs

We refer to the above mentioned matter and your facsimiles of the 8th July and 11th July.

As previously advised the contract for sale was rescinded and the contract deposit forfeited. Accordingly, this matter is at an end.

Any monies forwarded to us will be immediately returned to you.

Yours faithfully

John Shiel, solicitors”

I wish to refer briefly now to the evidence of Mr. Hickey. In relation to the actual issues which are relevant to this case none of Mr. Hickey’s evidence is material except in so far as it relates to what was to happen on the 11th July, 2005. The arrangements for that date, of course, were made between Mr. Fitzpatrick and the purchaser. It is clear beyond doubt from the evidence of those two witnesses that what was contemplated was a closing of the sale on the 11th July. Mr. Hickey, on the other hand, in his evidence seemed to suggest that all that was intended to be involved was some kind of round table meeting to see whether there was any basis on which a sale could go through notwithstanding the rescission. In giving this evidence, Mr. Hickey was either mistaken or disingenuous. Mr. Hickey was in Kerry on his holidays at the time that the arrangements were made. Mr. Hickey explained that the 11th July had been chosen because he would have been coming up to Dublin on that date with a child who had an appointment in Crumlin hospital. That would have been in the morning and, therefore, any matters relating to the sale would have had to be dealt with in the afternoon. It appears from Mr. Hickey’s evidence that after Mr. Gavin had had the conversation with Mr. Fowler on the 11th July, Mr. Fowler telephoned Mr. Hickey. Mr. Hickey then contacted Mr. Gavin on his mobile and on essential matters his evidence is not significantly different from that of Mr. Gavin. Despite the arrangements already made according to Mr. Gavin with Mr. Fowler whereby a closing would take place on the 12th July, as far as Mr. Hickey was concerned there was to be no closing and his client was standing by the rescission. Curiously enough this volte-face seemed to be largely based on Mr. Gavin not being in Dublin in circumstances where Mr. Hickey alleged that the so called meeting at 2.00 p.m. was to be held in Dublin. The telephone conversation took place, according to the evidence of Mr. Hickey which was not disputed by Mr. Gavin, about 12.30 or 12.45. It is clear that Mr. Hickey in no uncertain terms informed Mr. Gavin that any question of reviving the sale was off. Quite apart from the evidence of Mr. Gavin that, if necessary, the full interest would have been paid on closing, the issue of interest never really arose because it could not have come into play until the intended closing. Significantly, although Mr. Hickey both in direct examination and cross-examination was trying to suggest that all that was arranged for the 11th July was a mere meeting, he nevertheless was not able to give an accurate account of what Mr. Fowler actually told him following Mr. Fowler’s conversation with Mr. Gavin on the 11th. When it was put to him that Mr. Fowler must have told him he had had a conversation with Mr. Gavin concerning a proposed closing for the 11th he said “I don’t know whether he said it was to do with the proposed closing or anything”. Furthermore, Mr. Hickey admitted that Mr. Fowler in that conversation did say to him that he had told Mr. Gavin he was going to be in court all day and could not deal with the matter on the 11th. The obvious point was then put to Mr. Hickey in cross-examination as to how he could expect Mr. Gavin to be in Dublin on the 11th in these circumstances. Having regard in particular to the inconsistencies and hesitations in Mr. Hickey’s evidence the only credible account of what transpired in the discussion on the 11th July between Mr. Gavin and Mr. Fowler is that of Mr. Gavin. At any rate, Mr. Hickey’s evidence in this respect would be mere hearsay and significantly, as I have already mentioned, Mr. Fowler despite being in court was not called as a witness.

I have carefully considered the views of the learned trial judge but I cannot agree that the evidence is open to any conclusion other than that on the 11th July, 2005 as extended to the 12th July, 2005 the purchaser was ready and willing to close the sale in the manner and at the time stipulated. There is no doubt that the purchaser was hoping to escape interest but there is nothing in the evidence to suggest that if the vendor insisted on full interest, the purchaser would not have gone ahead with the purchase, indeed quite the contrary. The evidence also clearly establishes that the purchaser understood that it was the original contract as drawn up which had to be performed and that she was willing to do so notwithstanding some loose ends in relation to the side issues.

There remains, however, the important question of law, is the court entitled to grant an order for specific performance based on estoppel notwithstanding that the contract had been rescinded? The following clearly emerges from the evidence.

1. There was a promise that the sale would be closed on Monday, 11th July if the completion was done strictly in accordance with the original contract entered into at the auction.

2. The arrangements for the 11th July were by agreement postponed to Tuesday, 12th July.

3. On the 11th July and after that agreed postponement the promise was unequivocally reneged upon by Mr. Hickey on behalf of the vendor and thereafter the vendor insisted on the original rescission.

It is I think common case that the purchaser, if entitled to specific performance at all, can only be entitled to it by virtue of an estoppel arising from the promise made by the vendor and communicated by Mr. Fitzpatrick as slightly modified in terms of date by Mr. Fowler of the solicitors for the vendor with some consequent detriment. Was there such an estoppel? I am quite satisfied that there was. There appears to have been a great deal of argument and submission in the High Court to the effect that counsel for the purchaser had not made it clear whether at the end of the day he was relying on an alleged estoppel by representation or an alleged promissory or equitable estoppel. Even if there was some validity in that criticism it seems to me that it is irrelevant. The two forms of estoppel can frequently overlap, that is to say the common law estoppel by representation on the one hand and an equitable estoppel arising out of a promise on the other. It is clear from some of the modern English case law presented to the court and which I accept, that estoppel by representation need not necessarily be confined to a representation that a particular fact is true. It can be, what has been described as an estoppel by convention, that is to say, the parties agree between themselves artificially to act as though a particular fact was true. Put simply in this case there was a clear promise by the vendor to permit completion of the original contract but without prejudice to the original rescission if the purchaser defaulted. If the purchaser could demonstrate that she suffered detriment as a consequence she could in equity bind the vendor to that promise. The transfer of the monies and consequent liability for interest to the bank constituted such detriment. However, the other form of estoppel to which I referred would also have been operative in this case and would have had the same effect. That can be expressed as being an agreed understanding that provided the closing took place in accordance with the conditions as stipulated as to date and time, the contract would be taken as being alive and not rescinded. I do not think it matters which of these routes one follows. The trial judge herself at one point during the hearing suggested that the true nature of the representation which might give rise to the estoppel could be regarded as being that the agreement would be treated as not rescinded.

A major argument on behalf of the vendor which featured particularly in the High Court was based on the old adage that estoppel was a shield and not a sword. Again, some of the modern English case law placed before this court convincingly demonstrates that while there may be a technical truth in that adage it is largely irrelevant as far as having any operative effect. It certainly does not mean any longer, if it ever did mean it, that estoppel can only be a matter of defence and can never ground a cause of action. Estoppel is regularly raised as a matter of reply to a defence. Thus, in the example of this particular case, in so far as the vendor purports to set up the rescission as a defence to the counterclaim for specific performance, the reply to that defence on the part of the purchaser is that, in all the circumstances, the vendor is estopped or precluded from asserting the rescission. For all practical purposes, therefore, the counterclaim is grounded on estoppel.

In expressing what I believe to be the relevant law of estoppel for the purposes of this case, I am placing considerable reliance on the judgment of Robert Goff J. in the English High Court in the case of Amalgamated Property Company v. Texas Bank [1982] Q.B. 84 and the judgments in the Court of Appeal in the same case with particular reference to the judgment of Brandon LJ. He explained what was meant by the expression “estoppel by convention”. The case related to a bank guarantee given by a company the validity of which was being disputed by the liquidator of that company. A question arose as to whether even if the guarantee was not valid an estoppel had arisen by virtue of the conduct of the company which precluded denial of the guarantee. Brandon L.J. though forming the view that the guarantee was in fact effective went on to consider the estoppel question in the event that he was wrong. Two main arguments against the existence of the estoppel had been put forward in the High Court and the Court of Appeal. The first was that since the bank held its mistaken belief as a result of its own error alone and that the company had at most innocently acquiesced in that belief which it also held, there was no representation which could found an estoppel. The second argument was that the bank was seeking to use the estoppel not as a shield but as a sword and that that was not permitted by the law of estoppel. Brandon L.J. rejected both arguments. He expressed the view that the particular estoppel relied on was of the kind described in Spencer Bower and Turner, Estoppel by Representation, 3rd ed. (1977) at pp. 157-160 as “estoppel by convention”. He cited the relevant passage of that work as follows:

“This kind of estoppel is founded not on a representation of fact made by a representor and believed by a representee, but on an agreed statement of facts the truth of which has been assumed, by the convention of the parties, as the basis of a transaction into which they are about to enter. When the parties have acted in their transaction upon the agreed assumption that a given state of facts has to be accepted between them as true, then as regards that transaction each will be estopped as against the other from questioning the truth of the statement of facts so assumed.”

Brandon L.J. then dealt with the second argument which, as I have already pointed out, was an argument which featured heavily in this case and particularly in the High Court. Mr. Barron, counsel for the plaintiff, argued strongly that estoppel here was being used as a sword and not a shield. But this is what Brandon L.J. had to say in relation to this alleged principle at p. 131 of the report:

“In my view much of the language used in connection with these concepts is no more than a matter of semantics. Let me consider the present case, suppose that the bank had brought an action against the plaintiffs before they went into liquidation to recover monies owed by A.N.P.P. to Portsoken. In the statement of claim in such an action, the bank would have pleaded the contract of loan incorporating the guarantee, and averred that, on the true construction of the guarantee, the plaintiffs were bound to discharge the debt owed by A.N.P.P. to Portsoken. By their defence the plaintiffs would have pleaded that, on the true construction of the guarantee, the plaintiffs were only bound to discharge debts owed by A.N.P.P. to the bank, and not debts owed by A.N.P.P. to Portsoken. Then in their reply the bank would have pleaded that by reason of an estoppel arising from the matters discussed above, the plaintiffs were precluded from questioning the interpretation of the guarantee which both parties had, for the purpose of the transaction between them, assumed to be true.

In this way the bank, while still in form using the estoppel as a shield, would in substance be founding a cause of action on it. This illustrates what I would regard as the true proposition of law, that, while a party cannot in terms found a cause of action on an estoppel, he may, as a result of being able to rely on an estoppel succeed on a cause of action without being able to rely on that estoppel, he would necessarily have failed. That, in my view, is, in substance, the situation of the bank in the present case.”

The judgment of Robert Goff J. and the judgments of the other two members of the Court of Appeal, Lord Denning and Eveleigh L.J. were in similar vein and I do not find it necessary to expand further.

There is no difference between Irish and English law on estoppel. There is, of course, Irish case law on the subject but I think that the principles enunciated in that English case of Amalgamated Property Company v. Texas Bank which is included in the book of authorities put before this court are particularly relevant to the circumstances of this case.

In short, I am satisfied that the vendor was bound by the promise made to permit the sale to be closed in accordance with the original contract on the 11th July and equally bound by the agreed extension of time to the 12th July. This obligation does not arise on foot of a new contract but rather on the principle of estoppel which can be applied to the facts of this case in different ways but in my view, the simplest approach is to hold that the vendor was precluded from asserting the rescission as against the purchaser if the purchaser was ready and willing to perform the original contract on the date agreed. That promise was reneged upon in advance of the agreed closing time. Having regard to the detriment suffered by the purchaser to which I have referred the vendor is estopped from raising the rescission by way of defence to the counterclaim for specific performance. I would, therefore, allow the appeal and would dismiss the vendor’s action. I would grant the relief sought by way of specific performance in the purchaser’s counterclaim. The unfortunate problems which arose in connection with the completion of this sale were contributed to by negligent behaviour on the part of the purchaser and indeed at one point a certain element of male fides in that there was more or less an admission that an assertion on behalf of the purchaser that a particular clause in the contract was void was made purely as a tactic. Again, put simply there was fault on both sides. I would, therefore, disallow any claim for either interest or damages by either of the parties against the other in respect of the period commencing on the 12th July, 2005 and terminating on whatever reasonable date may now be fixed for completion pursuant to the specific performance order. The purchaser, of course, must pay full contractual interest payable on the contract up to the 11th July 2005 inclusive.