Supreme Court dismisses appeal on proprietary rights and contract variation in retirement village dispute.

THE SUPREME COURT

Record No. 30/01

Denham J.

Murray J.

Fennelly J.

BETWEEN

MARTHA HONIBALL KATHLEEN FOLEY ANN KELLY MARY ILLINGWORTH LIAM S FURLONG and AILEEN DEMPSEY

Plaintiffs /Appellants

and

JANE McGRATH AND RODERIC McGRATH and MAC ENTERPRISES LIMITED

Defendants /Respondents

JUDGMENT delivered the 24th day of April, 2002 by FENNELLY J.

Clonmannon Retirement Village has had a chequered history. It is to be hoped that this appeal will see the end of a prolonged

and bitter saga of litigation. Thankfully, the issues in dispute have been narrowed to two essentially technical legal questions.

The Village was established in the 1980’s on about twenty four acres of land surrounding an eighteenth century residence,

Clonmannon House in County Wicklow. It was to deliver a comprehensive scheme of residence and care for retired people.

Bungalows were leased to residents and care contracts made providing for the care and maintenance of the Village and facilities

for the residents. After a promising start, it failed, regrettably, to live up to expectations. In the early 1990’s it ran into financial

difficulties. The provision of services ceased. Residents refused to pay charges. From 1993 to 1996, all provision of services

ceased and Clonmannon House was closed up. These matters were the subject of a statutory investigation by an officer

appointed by the Minister for Enterprise and Employment. The Minister petitioned in October 1995 for the winding up of the

companies then responsible for running the scheme. A receiver had already been appointed over the lands in 1994. The first two

named respondents (“the McGraths”) purchased the enterprise in 1996. The third-named respondent was their nominee. This

was the third set of owners.

The subsequent attempt by the respondents to extricate the scheme from its difficulties became the subject of bitter

recriminations between the majority of the residents, who supported the respondents, and a minority, represented by the

appellants, who insisted on strict adherence to what they claimed to have been the terms of the original scheme. As was

inevitable, some of the original protagonists are now deceased and certain of the appellants are the legal representatives of

deceased residents.

In the years prior to 1993, an upper floor of Clonmannon House had been used to provide nursing home services to some of the

residents. The plaintiffs claimed that this was part of the scheme and they had a right to have this continued or at least that

they should have access to the entire of Clonmannon House for this and other purposes. When the McGraths gave notice that

they intended to reside with their family in the House in 1996, some residents, in particular the first-named appellant objected.

As the appellants state in their written submissions, this was the fundamental part of the appellants’ case and it precipitated

the present litigation which was heard by Kearns J in the High Court over a period of seven days.

The learned trial judge has detailed at some length the steps which the McGraths took, following their purchase in 1996, to

ascertain by means of consultations and questionnaires the wishes of the residents. This exercise demonstrated that the

overwhelming majority of the residents supported the McGraths’ efforts to formulate an altered and viable basis for the care

contract. Twenty five of them (in some cases their executors) swore affidavits in High Court proceedings to demonstrate their

support. The learned trial judge expressly found that the respondents had discharged the onus of showing that a bona fide

opinion had been formed that it was in the best interests of the residents to make the variations. The McGraths had properly

considered the amount of the service charge, doing so on the basis of a calculation with their accountant. In the event a

varied contract was put in place. This included the provision of a “country club” in the basement of Clonmannon House

consisting of a dining room, bar, reading room, launderette, office, store, toilet and library. The contract also provided for

reinstatement of the necessary arrangements for the maintenance of the Village as a whole.

All these matters have been thoroughly ventilated, investigated and litigated.

It is necessary, nonetheless, to describe the central elements in the original scheme but only insofar as is relevant to the points

remaining to be decided.

Two legal documents contain the essential elements of the original scheme. Firstly, Rayhill Property Company Limited (“Rayhill”)

granted a lease of each bungalow to some forty six lessees. Secondly, Home Affairs Limited (“Home Affairs”) entered into a

“care contract” with each of the lessees. However, it was also necessary for Home Affairs to join in each lease, because it was

the holder of an intermediate registered leasehold interest in the common areas of land and of certain parts of the structure of

Clonmannon House.

The respondents can be treated, for the purposes of this appeal, and without detailing the relevant conveyancing transactions,

as the successors of these companies. They purchased the lands and house at Clonmannon from the receiver, with the co-

operation of the liquidator, in 1996. They accepted by way of compromise of an earlier appeal to this Court that the third-

named respondent would take an assignment of the care contracts as successor of Home Affairs.

The title to the estate was divided to give effect to the various transactions. Rayhill from 1989 to 1991 (and its predecessor in

title, Retirement International (Ireland) Limited from 1985 to 1987) granted the leases of the bungalows. Home Affairs (and in

the earlier period its predecessor, Retirement Ireland Limited) entered into the individual care contracts. It is only leases

granted in the latter of these periods that are relevant to this appeal. In addition, Retirement International (Ireland) Limited, on

10th September 1984, granted a lease for a term of twenty five years from 1st August 1984 to Retirement Ireland Limited of all

the common areas and of certain parts not only of the leased bungalows but also, which is relevant to the issues on the appeal,

of Clonmannon House. Those parts were described as follows:

“firstly ALL THAT AND THOSE the Common Areas the sites of the staircase landings passages halls roofs external walls

and all other communal parts of the Buildings and secondly ALL THAT AND THOSE the main structural parts of the

Buildings including the external walls (but not the interior faces of such external walls as bound the Bungalows nor the

glass of the windows of the Bungalow) the roofs and foundations of the buildings and all cisterns tanks sewers drains

pipes wires central heating boiler ducts and conduits not solely used for the purpose of one Bungalow together with for

[Retirement Ireland Limited] it’s Lessees Sublessees Tenants, Subtenants, Invitees , Licensees and Assigns the right to

pass and repass at all times and for all purposes with or without vehicles over the lands coloured yellow on the map

hereto ...”

Home Affairs, therefore, shared, at the relevant time, an interest in the premises of Clonmannon House with Rayhill.

All the titles are registered. Thus the lessors’ interest in the bungalow leases was held at the times relevant to these

proceedings by the McGraths, subject to leases registered as burdens on their freehold folio, Number 17590 County Wicklow,

and in turn registered on leasehold folios. Similarly, the title of Home Affairs was registered on a separate leasehold folio 3265L

as well as a burden on the said folio 17590. However, a matter upon which much reliance was placed, the rights claimed by the

appellants to be enjoyed over Clonmannon House, were not registered as a burden on the leasehold folio (3265L) of Home

Affairs.

THE LEASE

It is now appropriate to turn to the terms of the bungalow leases.

Recital B.(1) to each lease stated:

“The Lessor is completing the development of the Village as a Retirement Village for private occupation for persons aged

fifty years and upwards and......[has] erected or intend[s] erecting 60 bungalows in the Village and have restored

Clonmannon House which is intended to be used as a part of the Retirement Village for the purposes hereinafter and in

the care contract specified ...”

Each lease referred to in these proceedings was granted for a term of forty five years or the life of the lessee whichever should

be shorter and in consideration of the payment of a sum of £42,000 together with a small annual rent payable to Rayhill and

also in consideration of the lessee entering into the care contract with Home Affairs, which also joined for the purpose of

certain “rights and easements...” in consideration of an additional rent of £1 per annum payable to it, Home Affairs granted and

demised to each lessee the rights and easements specified in the Second Part of the First Schedule. These are as follows:

"(a) Full right of way, at all times by day and by night, either on foot or with mechanically propelled vehicles of all kinds,

for all purposes connected with the use and enjoyment of the bungalow as a retirement bungalow forming part of a

retirement village, in common with all other persons entitled to a like right, to go, pass and repass, over and along the

roadway and those parts of the Common Areas as are laid out as driveways or pathways to and from the bungalow, to

and from the public highway, but limited to the use of the bungalow as a private residence.

(b) The right to park a motor car or motor cycle or bicycle, used for private purposes only in such car parking spaces

as may be allocated to the bungalow hereby demised by the Care Company from time to time.

(c) The free passage and running of water, soil, gas, air, telephone, television and telecommunications of all kinds, oil

and heating fuels and other services from and to the bungalow hereby demised through all drains, sewers, pipes,

conduits, cables and water courses now or at anytime within the period of 21 years from the date hereof to be in,

under, or passing through the Common Areas, or any part thereof.

(d) The free passage and running of water from the roof of the bungalow through the gutters and down pipes on the

outside of the bungalow of any adjoining bungalow to the drains and sewers forming part of the Common Areas.

(e) The right, in common with the Lessor and the Care Company, their and each of their servants, agents, invitees and

licensees, and the owners and occupiers of the other bungalows in the Village to use as a pleasure garden those portions

of the Common Areas as are laid out as pleasure gardens.

(f) The right of lateral support for the bungalow hereby demised from any adjoining bungalow."

Furthermore, Home Affairs entered into the covenants with each lessee which are set out in the Fourth Schedule:

"1. To keep those parts of the Common Areas as are laid out as roadways and pathways in good order and condition,

and properly tarmacadamed and whensoever necessary to retarmacadam same.

2. To keep the main structural parts of Clonmannon House, including the exterior walls and the roof thereof in good

order, repair and condition

3. Once in every third year, to paint all outside wood and stucco cement and other like exterior parts of Clonmannon

House with two coats of good oil and white lead paint in a proper and workmanlike manner in the same colour as that in

which the said work is painted, or in some other colour to be first approved of in writing by the Lessor.

4. To repair and keep the hallways, staircases and landings forming portion of Clonmannon House in good order repair

and condition, both substantial and decorative.

5. To keep the fixtures and fittings and machinery in Clonmannon House, and any fixtures and fittings common to two or

more bungalows in the Village in good order, repair and condition, both substantial and decorative and to replace the

same when so ever necessary.

6. To provide bins for the disposal of domestic rubbish and to make suitable arrangements for the disposal of such

domestic rubbish.

7. To keep those parts of the Common Area as are laid out as pleasure gardens and gardens neat and tidy and properly

mown and tended.

8. To make regulations from time to time for the user of the Common Areas, the car parking spaces and all fixtures,

fittings, machinery and equipment in the buildings."

In addition, each lease contains a number of references to the Care contract. Recital B. (1) cited above declares the intention

that the bungalows are to be used as part of the Retirement Village in a manner explicitly linked with the care contract. Each

lessee is not only bound to enter into the care contract, but continuance of the lease is made conditional upon his continuing

to observe its terms. Home Affairs, on the other hand, merely covenants to perform and observe the covenants on its part

“contained in the lease.” Specifically, Home Affairs enters a covenant for quiet enjoyment in terms that the lessee “may

peaceably hold and enjoy the easements ...demised to him by [Home Affairs] without any lawful interruption or disturbance

from or by...” [Home Affairs] or anyone on its behalf.

THE CARE CONTRACT

The care contract was, of course, a fundamental part of the original scheme. It was designed to enable elderly people to enjoy

the independence of living in their own homes, the comfort of having some daily needs catered for, the society of others and

the security of certain minimum health care. Naturally, the care contract provided for routine care and maintenance of the

estate. The first schedule to the care contract set out a list of the “care facilities” which Home Affairs then undertook

contractually to provide. The cost of these facilities in about 1990 was about £5,500 per annum. Some residents became

unwilling to pay so much. That issue is part of the history of the deterioration of the Village and its not necessary now to

review it. In the High Court, the appellants claimed that there was a right under the care contract to have a nursing home

facility. This was linked with the question of a right of access to Clonmannon House. The only relevant provisions of the care

contract are the following items from the First Schedule:

"11. The provision of a qualified nurse on call for minor medical complaints.

12. The provision/maintenance of an infirmary for the treatment of minor medical complaints."

Kearns J rejected the claim that there was a right to have a nursing home facility as completely unfounded. This is no longer a

live issue. What is of most relevance is the facility contained in the care contract to vary the terms of the care provided as

contained in two clauses:

"(vii) If the Care Company shall be of the opinion that in the interests of the Village as a whole care facilities not hereby

agreed to be provided by the Care Company should in future be provided then the Care Company shall give notice in

writing to all the Lessees in the Village of such intention and unless not less that 75% of the Lessees in the Village object

in writing to the Care Company addressed to its registered office within fourteen days of the date of posting by the Care

Company of its notice of intention to provide such additional care facilities then the First Schedule hereto shall be

deemed to have been amended to include the provisions of such new care facilities as and from the date when the Care

Company shall in its discretion commence such additional care facilities.

(viii) If the Care Company shall of the opinion that in the interests of the Village as a whole it is desirable that care

facilities hitherto provided or herein agreed to be provided by the Care Company should no longer be provided then the

Care Company shall give notice in writing to all the Lessees in the Village of such intention and unless not less than 75%

of the Lessees in the Village object in writing to the Care Company addressed to its registered office within fourteen

days of the date of posting by the Care Company of its notice of intention to withdraw such care facilities then the First

Schedule hereto shall be deemed to have been amended to delete the provision of such hitherto provided care facilities

as and from the date when the Care Company shall in its discretion cease to provide such care facilities."

The first of these provisions allowed for the provision of new or additional facilities, the second for the elimination of services

hitherto provided. Apparently, it would suffice if twenty five per cent of the residents supported such a proposed change. In

each case, however, Home Affairs had to be “of the opinion that [the change was] in the interests of the village as a whole.” It

was held by Kearns J and is not now disputed that these clauses permitted variation of the care contract. The validity of the

opinion formed by the McGraths, in order to effect the variations, nonetheless remains at issue.

THE BROCHURES

As already indicated, the appellants have at all times maintained that they are entitled to insist on the level of services to be

provided on the lines of the original care contract. In particular, they maintained that these had to include a nursing home

facility in Clonmannon House. For this reason, therefore, they have claimed and continue to claim a general right of access to

Clonmannon House. Consequently, the McGraths did not have the right to live in the house. Furthermore, they contended that

such residence was in contravention of planning legislation and, in particular, the terms of a planning permission which had been

granted so that nursing home facilities could be provided. In support of their claim that the respondents were bound to provide

a retirement complex on the lines for which they contended, the appellants placed reliance on some sales brochures produced

at the time of the marketing of the Village complex. Kearns J indulged in a little hyperbole when he described one of these

brochures as promising “a version of heaven on earth to purchasers.” They demonstrated “an impressive range of facilities .....

under a picture of smiling staff outside Clonmannon House.” More directly to the point, the following paragraphs seemed, in the

view of the learned trial judge, clearly to imply that the residents would have access to and use of the facilities of Clonmannon

House:

"Built in 1780, the house - or Clubhouse, as it is known to the residents - is one of the finest examples of its period, no

expense having been spared on its upkeep over the years.

The house is the centre of all village activity. Incorporating all the traditional features of gracious living, it is an

extension of your own home, a place where you can relax, entertain friends, or participate in a wide variety of social and

recreational pursuits.

The house has a small infirmary, where nursing staff are on call at all times, and there is also inter-denominational

oratory for religious services.

The Library, overlooking the lovely Wicklow mountains, is ideal for moments of quiet contemplation in front of a winter

log fire. The large and beautifully furnished Drawing Room is a place to enjoy coffee or an after-lunch liqueur. Another

feature of the Clubhouse is the Billiards Room, always available to residents and their guests. Overnight accommodation

is available for the use of visitors.

Everything at Clonmannon Village is designed for your convenience, contentment and peace of mind."

It is important to note that the McGraths at no time saw this brochure before the purchase.

THE HIGH COURT PROCEEDINGS

The essence of the case made by the appellants in the High Court was:

A) the McGraths did not have the right to reside in Clonmannon House, because, inter alia, the planning permission

precluded it;

B) the respondents were bound to provide a nursing home;

C) the appellants had a right to enjoy general access to Clonmannon House;

D) the respondents had not validly varied the care contract.

The learned trial judge rejected all these claims. As already stated, he found the contention that there was a right to a nursing

home to be completely without foundation in fact. There was nothing in the planning permission which prevented the McGrath

residing in Clonmannon House. He found that there was no defect in the variation of the care contract effected by the

respondents. On the question of the right of access to Clonmannon House, he accepted the evidence of Mrs McGrath that she

had not seen the brochure before purchasing the property and accepted the respondents submission that liability for any such

representation as might be contained in such a brochure would not affect a purchaser for value without notice. In any event,

nothing in the brochures prevented the respondent from availing of the machinery provided in the care contract for the

variation of its terms. He also rejected the appellants’ contention that the rights claimed affected the land without registration

by virtue of the provisions of section 72 (1)(j) of the Registration of Title Act, 1964, as being included in the expression:

“The rights of every person in actual occupation of the land or in receipt of the rents or profits thereof....”

The learned trial judge held that there was, in any event, no question of anybody being in possession at the time of the

purchase. Clonmannon House had been closed for three years when the McGraths became interested. Nor were the rights in the

care contract rights in land. They were mere contractual rights which could be varied.

THE APPEAL

The issues have been further narrowed down on this appeal. No further reliance is placed on the claimed absence of planning

permission for the residence by the McGraths in Clonmannon House. The appellants make essentially two arguments.

It is submitted that the right of access to Clonmannon House is granted by necessary implication having regard to the terms of

the lease. Clonmannon House was the central core of the entire scheme. While the brochure was not relied upon as varying the

contract or adding to the lease, the lease and the care contract were two documents which together showed the intention of

the parties. The care contract should be read as if it were appended to the lease. The recitals to the lease followed closely the

terms of the brochure. There are numerous references to the care contract in the lease. It was not possible to make sense of

the lease, and in particular the covenants by Home Affairs as set out in the Fourth Schedule (as quoted above) to maintain and

repair Clonmannon House if the lessee did not have access to it. The right of access could also be considered as a license

coupled with an interest. The license is contained in clause 15 of the First Schedule to the care contract:

"The provision/maintenance of the Club House and in particular the bar, billiard room, laundry room, hair

salon/barber/beauty salon, grocery/newsagent, cinema, lounge, dining room, pharmacy and medical centre.”

The interest coupled with this is to be found in the lease.

The appellants’ continued challenge to the variation of the care contract is now based essentially on the narrow contention

that the McGraths could not validly have formed a bona fide opinion, as required by the care contract, that the variation was in

the interests of the Village as a whole, because they were affected in this by their own wish to reside in Clonmannon House.

I will refer only briefly to the submissions on these two issues. As to the contents of the brochure, they rely on the proposition

that extrinsic evidence cannot be used to contradict, add to or alter the terms of a deed.. Insofar as the brochure is replicated

in the terms of the care contract, the latter was expressly made subject to the possibility of variation. Representations made

by Rayhill cannot affect the respondents as purchasers for value without notice. Furthermore, neither the care contracts nor

the brochures nor any rights claimed by virtue of them was registered as a burden on either the freehold folio of the McGraths

or on the leasehold folio of Home Affairs. The separation of the lease and the care contract was a clear and deliberate part of

the scheme. The lease did not confer any rights of access to Clonmannon House on the lessees of the bungalows.

With regard to the variation, the respondents point to the evidence of the respondents, and in particular of Mrs Jane McGrath

which was accepted by the learned trial judge. The judge had asked that she give evidence first of the circumstances of the

variation. She had said that she would have had no problem with the reviving of the old care contracts. It was clear, however,

that there were serious cost implications. In fact, when consulted, a very large majority of the residents (in many cases, it was

their legal personal representatives) supported a variation to reduce the level of services and thus their cost.

CONCLUSION

I will deal first with the issue of the right of access. I have set out all the relevant terms of the lease above.

The scheme for the Retirement Village was effected by two distinct documents, each with its separate purpose. The lease

conferred a leasehold interest on each resident in respect of his or her own bungalow. It was not, of course, restricted to the

bungalow. The lease was part of the scheme for the Retirement Village. Consequently, the lessor entered into a number of

covenants relevant to the upkeep of the estate generally. Since Home Affairs was the registered owner (by means of the

intermediate lease) of the common areas of the estate, it joined for the purpose of granting a number of easements and similar

rights over some common areas and imposing covenants on Home Affairs. These are all set out in the Second Part of the First

Schedule and in the Fourth Schedule, which I have quoted above. Nowhere does the document purport to grant any right of

access to Clonmannon House, nor do the appellants claim that it does so expressly.

This leads to the first point, the reliance placed by the appellants on the contents of the brochure. The respondents are clearly

correct in their submission that the terms of the brochure cannot be the source of any such rights. It is trite law that extrinsic

evidence cannot be relied upon to contradict, add to or vary the terms of a deed. (Norton on Deeds, 2nd ed. p 135). The lease

sets out a comprehensive list of the rights and interests it grants and the obligations it imposes. It does not purport to

incorporate the terms of the brochure. These are in the nature of advertising promotion. They do not confer any rights unless

they are incorporated in the lease. It is not necessary, therefore, to apply the additional rule, though it would also clearly

apply, namely that a representation such as that contained in the brochure could not bind a purchaser for value without notice

of the property.

I also reject the submission that the lease conferred on each lessee an implied right of access to Clonmannon House. Such an

implication would have to follow necessarily and obviously from the terms of the deed. It is said that the covenants entered into

by Home Affairs make no sense if there is no right of access. In one sense, that is so. A party does not normally undertake an

obligation to another person to repair a property if that other has no interest in having that repair carried out. However, the

implication of the grant of a property right would require more. It would have to be demonstrated that the term effecting such a

grant would as a matter of compelling necessity have to be implied to give what is usually called business efficacy to the terms

of what is expressly agreed. If, for example, the deed, as distinct from the care contract had contained the obligation to

provide services at Clonmannon House, it would have been impossible for the beneficiary to enjoy them without a corresponding

right to enter the house. Home Affairs can perfectly well perform its repair obligations at Clonmannon House without conferring

any right of access on the bungalow lessees. Such a right would have to be considered by reference to the care contract. To

the extent that it provides for services to be rendered at Clonmannon House, the law will imply a right of access if that is

clearly necessary in order to receive the services. It does not follow, however, that a proprietary right has to be granted. For

essentially similar reasons, I reject the contention that there is here involved a license coupled with an interest. In truth the

appellants’ argument begs the question. Sometimes a right in land cannot be effectively enjoyed unless accompanied by the

grant of a license to enter. (see Wylie, Irish Land Law 2nd ed. par 20.04.) The appellants cannot point to any such antecedent

interest in land. Rather their case is the converse, namely that the interest in land is required if they are to enjoy the benefit

they claim to have been conferred by the care contract.

For these reasons, I would reject the appellants’ contention that they have a proprietary interest in Clonmannon House and it is

unnecessary to consider the points concerning the Registration of Title Acts.

I would also reject the argument against the validity of the variation of the care contract. The appellants make a point which is

more usually encountered in judicial review proceedings, where a decision of a public-law character is being challenged. The

care contract was a private contract made between the parties to a commercial transaction. The company or persons

responsible for the running of the Retirement Village will of necessity have an interest in the matter. Furthermore, the learned

trial judge has made findings of fact, more than sufficiently supported by the evidence. The McGraths engaged in a careful and

well supported exercise to ascertain the genuine wishes of the residents. The learned trial judge has found that they discharged

the burden of proof of showing that the variation was in the interests of the Village as a whole. Essentially, the appellants’ point

is a technical one. They have to accept that the contract can be varied; they cannot dispute the findings of fact made by the

learned trial judge. They say that the McGraths had an interest in the outcome and could not form a fair and bona fide opinion,

because they could not behave objectively. They were the persons bound under the contract to form any such opinion. The

finding of the High Court means that they formed the opinion bona fide. To my mind that disposes of this ground of appeal.

Accordingly, I would dismiss the appeal and affirm the order of the High Court.