Contract rescinded for failure to obtain planning permission within four months under Vendor and Purchaser Act 1874.

THE SUPREME COURT

McGuinness J.

Geoghegan J.

McCracken J.

414/03

IN THE MATTER OF THE VENDOR AND PURCHASER ACT, 1874

BETWEEN/

MARY O’CONNOR

Plaintiff/Appellant

and

PATRICK COADY

Defendant/Respondent

JUDGMENT of Mr. Justice Geoghegan delivered the 21st day of October 2004

1. The background to this appeal is that the appellant sold certain property to the respondent subject to the obtaining of planning

permission within four months and with no specific closing date but with the provision that the sale was to be closed within seven

days of the granting of the permission. The planning permission was not granted until more than a year after the date of the

contract. When the four month period had expired without the permission being granted, neither party initially gave any notice to the

other indicating that he or she was treating the contract as at an end. At a time, however, when it appeared that planning permission

was shortly going to issue the respondent became active and through his solicitor made suggestions as to how the sale would

proceed. This letter was responded to by the solicitors for the appellant in a letter headed “subject to contract/contract denied”.

They expressed surprise at the contents and asserted that the contract had lapsed after the four months period. The same solicitors

suggested that there was, therefore, no longer any contract but that their client would be willing to renegotiate a new contract at a

new price. The respondent displayed indignation at this response on the alleged basis that all the indications had been that the

appellant was treating the contract as still alive and indeed the deposit had never been returned. The respondent, accordingly,

launched specific performance proceedings in the Circuit Court. The appellant thereupon instituted these proceedings in the High

Court under the Vendor and Purchaser Act, 1874. The special endorsement of claim on the Special Summons sought clarification from

the court on three questions (the third of which is not now regarded as relevant). That special endorsement of claim subsequently

became amended by the addition of further questions. In its original form the two relevant questions were as follows:

1. Was the plaintiff entitled to rescind the contract dated the 31st May following the failure of the defendant to comply with

the special condition on obtaining planning permission by the 30th September, 2001?

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

2. For reasons which I will be developing further in this judgment, I believe that those were the relevant questions and that it is

somewhat unfortunate that unnecessary confusion was introduced into the case by the additional questions in the amended special

endorsement of claim. Those additional questions were as follows:

“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 said

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 said 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 enforceable.”

3. The case came for hearing before Carroll J. and she delivered a reserved judgment on the 12th November, 2003. The effect of the

answers which she gave to the questions was that the respondent succeeded in his contention that there was still a subsisting

contract.

4. It would seem to me that the reasoning of Carroll J. was based on the arguments and agreed parameters of the case put before

her by counsel which were more or less repeated at the hearing of the appeal before this court. For instance, the learned trial judge

states in her judgment that the vendor submitted firstly that the condition about planning permission was a condition precedent, “in

which case no contract came into existence”. It would seem to me that to quite an extent, even before this court, counsel on both

sides accepted that there was a relevant issue as to whether the condition was a “condition precedent” or a “condition subsequent”.

For reasons which I will elaborate on, I do not consider that that distinction is either particularly relevant or particularly helpful.

5. Of the many cases included in the book of authorities the one which the learned trial judge found most relevant was Sepia Limited

v. M. and P. Hanlon Limited [1979] I.L.R.M. 11, a decision of Costello J. I would respectfully differ from the learned trial judge in the

degree of relevance that she attached to that case which would seem to me to be quite different in a number of respects. In the

Sepia case there had been a contract of sale subject to the granting of planning permission. There was no time limit on the condition

as to planning permission but there was a specified closing date in connection with which it had been made clear that time was of the

essence and in the context that the planning permission had to be obtained before the closing date. A second contract was then

entered into relating to separate property and containing no condition as to planning permission but amending also the first contract

the end result of which was that there was a common closing date in respect of which for the reasons given by Costello J. time was

not of the essence. Since there was only a non-essential closing date and no express time limit on the planning condition, clearly the

only relevant date could be a date created by a notice making time of the essence. Costello J., however, pointed out at p. 24 of the

report that in the case of the first contract if the purchaser did not waive the special condition relating to planning permission that

contract “would come to an end at the expiration of the notice (the condition relating to planning permission not having been

complied with)” and the learned judge cites Smith v. Butler [1900] 1 Q.B. 694; and Aberfoyle Plantation Limited v. Cheng [1960] A.C.

115 (a case relied on by the appellant on this appeal). If anything, that sentence, in my opinion, is more helpful to the appellant than

to the respondent but I do not think that Costello J’s words should be interpreted as his having expressed any view as to whether in

the case of a conditional contract, if the condition fails there is a self-executing termination of the contract or on the other hand if

one of the parties has to indicate that he or she is treating it as at an end. It will emerge later in this judgment that I favour the

latter view and in so doing, I am satisfied that I am in no way differing from any views expressed by Costello J. I do not think that he

addressed that question at all as it did not arise.

6. Returning to the case at hand, the position, as I see it, is that although a helpful book of authorities has been furnished to the

court none of the cases are directly in point to the precise questions that arise here. It is important, however, to note that whatever

answers may be arrived at by this court to the questions raised in the summons it does not necessarily follow that they can be

transported to some other future case in which a planning permission condition or some similar condition is inserted. In every case, as

to what is to happen in the event of a condition not being fulfilled is first and foremost a matter for agreement between the parties.

The courts will uphold any lawful agreement in this connection. Such agreement may be expressed or implied. If, however, there are

no express provisions and if there are no concrete outside circumstances which would raise particular implications there are principles

which a court can lay down as applicable in interpreting what the implied agreement of the parties is.

7. The important principles in this connection were in fact laid down by the Privy Council in Aberfoyle Plantations Limited v. Cheng

cited above, principles which in whole or in part have been referred to in Irish cases as well as Australia, New Zealand, Northern

Ireland and other English cases. Lord Jenkins (who sat with Lord Denning and the Rt. Hon. L.M.D. de Silva) in giving the advice of the

Board laid down the following principles as applicable subject of course to different arrangements having been agreed between the

parties.

“(i) Where a conditional contract of sale fixes a date for completion of the sale, then the condition must be fulfilled by that

date;

(ii) Where a conditional contract of sale fixes no date for completion of the sale then the condition must be fulfilled within

reasonable time;

(iii) Where a conditional contract of sale fixes (whether specifically or by reference to the date fixed for completion) the date

by which the condition is to be fulfilled, then the date so fixed must be strictly adhered to and the time allowed is not to be

extended by reference to equitable principles.”

8. The decision of the Privy Council in Aberfoyle has always been controversial but only in one respect. On one interpretation of the

opinion delivered by Lord Jenkins (I put it this way because there are hugely varying interpretations as to what he did in fact mean)

the condition in that case was treated as a condition precedent in the sense of a condition precedent to the coming into existence of

the contract. But as far as I can understand from the case law both in this jurisdiction, in Northern Ireland, in England, in Australia

and New Zealand there is no judicial controversy as to the principle that if a time limit is specified in such a condition, then, in the

absence of agreement to the contrary it is non-extendable. Not only was this principle accepted by Costello J. in Sepia as referred to

above but it was also acknowledged by McWilliam J. in Maloney v. Elf Investments Limited (unreported judgment in the High Court

delivered 7th December, 1979). Speaking in the context of waiver of the condition which of course does not apply here, McWilliam J.

at p. 8 of the judgment said that he was of opinion that “in the absence of any other authority, that the decision in the Aberfoyle

case as to the necessity for exact compliance with the date mentioned in the condition means that there can be no question of

waiver after that date has passed.” Again in reliance on Aberfoyle Murray J. in the Northern Ireland case of McKillop v. McMullan

[1979] N.I. 85 at 92 appears to endorse the view that where there was a specified completion date and the contract was subject to

planning permission that date had to be adhered to for fulfilment of the condition. In this non-controversial respect Aberfoyle has

been followed also in judgments delivered in the High Court of Australia in Perri v. Coolangatta Investments Property Limited (1982)

149 CLR 537. In relation to all aspects of this case I have gained considerable assistance from the judgments in that Australian case

and I will be returning to them. It is of some passing interest to note that the five judge court comprised three judges all of whom are

now former Chief Justices of the High Court of Australia and each of whom delivered written judgments. The court consisted of Gibbs

C.J., Stephen, Mason, Wilson and Brennan JJ.

9. The judgment of Kenny J. in Healy v. Healy (unreported judgment 3rd December, 1973) deals with the question of waiver and is not

of any real assistance in this case except that by way of obiter dicta Kenny J. throws out the suggestion that where, as in this case,

the closing date is fixed by reference to the grant of the planning permission under the condition and where no planning permission

has in fact issued by the date the so called contract without the obligation to comply with the condition might be void for

uncertainty. It would seem to me that a court would be slow to come to that conclusion unless it was absolutely compelled to do so.

Fortunately the question does not arise to be determined on this Vendor and Purchaser summons.

10. I am of the view, for the reasons which I have indicated, that once the date mentioned in the condition had passed without the

planning permission being available there was an entitlement to bring the contract to an end. I put it that way because I do not

accept (and it is clear from the judgment of Carroll J. that counsel for the appellant in the High Court was in agreement on this) that

the contract automatically came to an end. It was capable of being brought to an end by notification from one party to the other. I

cannot agree with the learned High Court judge that a twenty eight day notice under the contract would have to be served. Indeed

the clause in the form of Law Society contract used requiring in certain circumstances a twenty eight day notice is not drafted so as

to cover the situation which arose here.

11. There is no doubt that the condition was not fulfilled within the prescribed time but the question is, did the appellant effectively

bring the contract to an end?

12. It is at this point that it is helpful and relevant to summarise the relevant facts. The relevant condition read as follows:

“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 4 months of the date hereof.”

13. It is that “special condition” which rendered the contract a “conditional contract” an expression to which I will return. A

subsequent “special condition” read as follows:

“The closing date herein shall be 7 days after issue of the Final Grant of Planning Permission referred to at special condition 4

above.”

14. It is clear from the correspondence exhibited that the contract had been drawn up about two months before it was actually

signed and had originally inserted a six month period which because of the delay was altered to four months. The closing date

suggested by the purchaser of four weeks after the issue of the planning permission was altered to seven days on the insistence of

the respondent. The only significance of those negotiations is that they clearly negative any suggestion that the time limit on the

condition was not intended to be essential. There is quite clearly nothing therefore to negative the general law on this as enunciated

in Aberfoyle.

15. The subsequent events were in many ways strange and remain unexplained. A perfectly sensible letter was written on the 23rd

August, 2001 by Patrick Tallan and Co., solicitors for the appellant to Richard Dennehy and Co. the solicitors for the respondents. The

letter noted that the solicitors for the vendor had not heard from the other solicitors for some time in relation to the planning

application and asked for information as to the status thereof and as to when the purchaser would be in a position to complete. The

affidavit of the appellant states that that letter elicited no reply or information. However, this is disputed in a replying affidavit of the

respondent in which he says that it is incorrect to assert that the appellant received no reply or information from the respondent

regarding that query contained in the letter. He says that he is instructed by his solicitor that the solicitor telephoned the appellant’s

firm in or about 19th September, 2001 and advised Ms. Brenda Rushe of that firm that he was not in a position to confirm the planning

application as he had difficulties contacting his clients who were out of the country on business at that time and further advised her

that he was not in a position to confirm matters in writing due to a family bereavement. It is stated that the solicitors suggested to

Ms. Rushe that she should request her clients to call into the offices of C. and M. Holdings Limited in Ashbourne to speak to either a

Mr. Gerard Foran or himself as to the current status of the planning permission. In the event, whether this happened or not is not

particularly relevant because it appears that no further correspondence passed between the parties until September, 2002. The first

such letter came from Richard Dennehy and Co. to Patrick Tallan and Co. and was dated the 3rd September, 2002. It read as follows:

“Dear Sirs

We refer to the above and our recent conversation regarding the same.

We now understand that planning permission issued in June of this year. However an appeal was lodged and this appeal is

pending hearing in September or October of this year.

Our clients are confident that the appeal will not cause difficulty to them.

Further to the same and to enable completion can you please reply to our requisitions on title which were forwarded on the

26th June, of last year and confirm that our draft transfer deed is approved.

Yours faithfully”

16. There was a follow up letter of the 11th September requiring a Residential Property Tax Clearance Certificate and a Capital Gains

Tax Clearance Certificate but nothing turns on that since the letter of the 3rd September was replied to by Patrick Tallan & Co. by a

letter of the 12th September, 2002. It is important that I should quote this letter in full. It reads as follows:

“Subject to contract/contract denied

Re: Your client: Patrick Coady

Our client: Mary O’Connor, lands at Castle Street,

Ashbourne, Co. Meath

Dear Sirs

We acknowledge receipt of your letter of the 3rd inst. And were most surprised at the contents. As you are aware, under the

terms of the contract, this contract has lapsed and is at an end.

Without prejudice, however, our clients will be prepared to renegotiate terms for the sale of the property and if your client

wishes to make an offer perhaps you would let us hear from you at your earliest possible convenience.

In order to finalise matters we return herewith deposit in the sum of €57,138.21 (£45,000).

In the meantime, of course, we have no authority to bind our clients in this or any related correspondence and they will not

be so bound until formal contracts have been executed by them and a full deposit paid. We are not agents within the meaning

of the Statute of Frauds.

Yours faithfully”

17. A number of points are worth noting from this letter. First of all it is not a letter expressly purporting to rescind the contract. On

the face of it, it is simply expressing surprise on the basis that the contract had lapsed once the date on the condition had passed. It

is necessary, however, to look at the substance and not the mere form of the letter. There is no doubt that the letter is making clear

that the vendor does not regard herself as bound by the contract. The denial of contract at the head of the letter copper fastens

that view. Once the condition was not fulfilled within the correct time either party was entitled to treat the contract as at an end but

was bound to notify the other party that he or she was so treating it. Once such notification in whatever form took place there was

no longer a contract unless the party purporting to treat the contract as at an end had in fact expressly or impliedly affirmed the

contract. Mere lapse of time would not necessarily constitute such affirmation, there would have to be some positive indication that

the party otherwise entitled to rescind was treating the contract as still in being. Although time was allowed to elapse in this case no

such affirmation took place and, therefore, this voidable contract was effectively avoided or rescinded by the letter of the 12th

September, 2002.

18. As I have already pointed out, counsel for the appellant has not argued in either court that the contract automatically came to

an end. On one view this concession was surprising in the light of the terms of the letter of the 12th September, 2002 in which the

case of automatic lapse was made. I agree with the views of McCracken J. that the issue of automatic lapse does not arise but, for

reasons which I will be indicating, my present view at any rate, would be that such a conditional contract is voidable and not void on

the non-fulfilment of the condition.

19. The second point to be noted from the letter of the 12th September, 2002 is the phrase “in order to finalise matters” preceding a

statement that they were returning the deposit. The deposit was not in fact enclosed. However, as McCracken J. points out in his

judgment it appears to be accepted that this was an oversight. The non-return of the deposit therefore is not inconsistent with the

rescission.

20. If I am right in my view that the time limit on the condition would not be self-executing and that an act of rescission would be

required, the basis for such requirement must be considered as flowing from the implied agreement of the parties. Obviously such

rescission cannot be effective after a positive affirmation of the contract.

21. In fairness to the parties on both sides of this case and their legal advisers, the questions raised are not without difficulty and

have not really been considered before by the Irish courts. Analogous questions, however, have been considered in the Australian

case of Perri referred to above. I do not intend to go into the facts of that case in too much detail. The condition involved was not a

planning permission condition though other Australian cases involving such a condition are considered throughout the judgments in the

context of their relevance. The condition in the Perri case was that the contract was being entered into subject to the purchasers

completing a sale of certain other properties. No express time limit was fixed for the performance of the condition but it was held, as

would be held in these courts, that it had to be complied with within a reasonable time. Nor was there an express completion date.

Despite the differences in the factual background the observations of the judges were in many instances highly relevant to this case.

First of all, a number of the judgments dealt with the distinction between condition precedent and condition subsequent. Both counsel

in this case and, I think by implication, the learned trial judge considered that distinction relevant. But the Australian judgments and

references to other cases and articles contained therein dealing with that distinction have convinced me that it is not really a helpful

one. On the hearing of the appeal before this court, counsel for the appellant, Mr. O’Dwyer, S.C. and counsel for the respondent, Mr.

Ralston, S.C. seemed to assume that the expression “condition precedent” necessarily and exclusively refers to a condition the effect

of non-compliance with which means that no contract of any kind comes into existence. They seemed to take the view that every

other kind of a condition that might be said to render the contract “conditional” was a condition subsequent. Gibbs C.J. in the Perri

case considered that the completion of the sale of the other property was a “condition precedent to the performance of certain of

the obligations of the parties under the contract including the obligation of the respondent to complete the sale.” He goes on to

make the following observation:

“It has sometimes proved difficult to decide whether a particular condition of a contract should be classified as a condition

precedent or a condition subsequent, and as Professor Stoljar has pointed out in ‘the contractual concept of condition’ Law

Quarterly Review Volume 69 (1953) 485 at p. 506 if the words ‘precedent’ and ‘subsequent’ are to make sense they must be

connected with a definite point of reference since they express a relationship in time, the question which must be asked is

‘precedent to what? Subsequent to what?’. However, provided the effect of a condition is clearly understood, its classification

may be merely a matter of words. The condition in the present case was not a condition precedent to the formation of a

binding contract (my emphasis). It is clear that a binding contract came into existence immediately upon signature, and that

the parties to it were from that moment subject to certain obligations.”

22. Referring to a passage in a judgment of Isaacs J. in another Australian case Maynard v. Goode (1926) 37 CLR at 540 he agrees

with Isaacs J. in pointing out that

“In one sense the stipulation might be a condition precedent to the performance of a particular term of the contract, while in

another sense it was a condition subsequent in relation to the whole contract, since the failure of the stipulation would have

entitled the vendor to retire from the transaction altogether.”

23. He goes on to refer to other cases in which it was pointed out the problems of making any relevant distinction between condition

precedent and condition subsequent. Mason J. deals with the topic in similar vein in his judgment. He points out that generally

speaking the court will tend to favour the construction which leads to the conclusion that a particular stipulation is a condition

precedent to performance as against that which leads to the conclusion that the stipulation is a condition precedent to the formation

or existence of the contract. He points out that in most cases it is artificial to say in the face of the details settled upon by the

parties that there is no binding contract unless the event in question happens. This view exactly corresponds with the view expressed

by McWilliam J. in O’Mullane v. Riordan [1978] I.L.R.M. 73 at 77 where he said the following:

“The price of the land has increased astronomically since May 1972 and it has been argued that, as this contract was subject

to a condition (i.e. the obtaining of planning permission) there was no contract until the planning permission had been obtained

and that this is the time at which I have to ascertain the value of the land for the purpose of establishing the fairness of the

bargain. I was referred in this context to the case of Aberfoyle Plantations Limited v. Kajw Bien Cheng [1960] AC 115. I cannot

accept this argument. The fact that a contract is subject to a condition has the effect of making it unenforceable until the

condition is fulfilled, but it does not mean that there is no contract at all and the case cited decided that the purchaser was

entitled to recover his deposit under a term of the agreement. A conditional contract is one which becomes enforceable

provided the condition is fulfilled within the time provided by the contract or if no time is provided within a reasonable time.”

24. I think that this was the view adopted also by Murray J. in the Northern Ireland case of McKillop cited above notwithstanding the

adverse views on that case expressed by the learned High Court judge.

25. Returning to the Perri case and moving to the judgment of Wilson J. he refers to a passage in the judgment of the well known

New Zealand judge, Cooke J., in a case called Hunt v. Wilson (1978) 2 NZLR 261 at 267 in which that judge said the following:

“I venture to think that the ambiguous labels precedent and subsequent when applied to conditions are seldom of real help in

solving issues in this branch of contract law. Certainly they can be positively misleading unless the meaning of what has been

said is made specific by explaining to what the condition in question is seen as precedent or subsequent”.

26. Wilson J. goes on to agree with that view and to point out that the special condition in the Perri case could be described with

accuracy as either a condition subsequent to the formation of the contract or is a condition precedent to an obligation in either party

to proceed to completion. These views as to the respective meanings of “condition precedent” and “condition subsequent” and as to

their frequent overlap were endorsed in the judgment of Brennan J. with which Stephen J. agreed.

27. In my view, the more helpful terminology is the distinction between a “conditional contract” and an “unconditional contract”. As

we all know, by a strange quirk of the law, ordinary terms of an unconditional contract if they are of sufficient importance will

themselves be described as “conditions” but that does not mean that the contract is conditional. Normally, a conditional contract will

not mean a contract which only comes into existence upon fulfilment of the condition but rather a contract which can only be

enforced upon fulfilment of the condition. That is what this contract was.

28. As I have explained, it has already been conceded that the contract did not automatically lapse upon the breach of condition.

Although not all of the views of the judges in the Perri case on this point fully coincided, I think that the case can be read as

supporting that concession. But if the contract does not automatically “lapse” to use the terminology contained in the letter from the

solicitors for the appellant, how does it come to an end? That is the question which now has to be explored in more detail and on that

question also there was no real assistance to be gained from any of the authorities in the book of authorities but I did find assistance

from the judgments in the Perri case. Gibbs C.J. in paragraph 10 of his judgment said the following:

“For these reasons I consider that when the time has elapsed for performance of a condition which is not a promissory

condition, but a condition precedent to the obligation to complete a contract of sale, either party, if not in default, can elect

to treat the contract as at an end if the condition has not been fulfilled or waived and that it is not necessary first to give a

notice calling on the party in default to complete the contract or fulfil the condition.”

29. Later in the same paragraph the same judge says the following:

“Although in Aberfoyle Plantations Limited v. Cheng … an erroneous view may have been taken of the nature of the condition

there considered, nevertheless, in my respectful opinion, it was correct to hold that the time fixed by the contract for

performance of the condition was not to be extended by reference to equitable principles, …”

30. But in paragraph 11 the same judge also observes:

“In the view that I have formed, it was then open to the respondent to avoid the contract without first giving any notice

limiting a reasonable time for completion. By instituting the proceedings, before the condition had been either fulfilled or

waived the respondent sufficiently evidenced its election to avoid the contract.”

31. I should point out that these views expressed by Gibbs C. J. were in the context of his approving similar views expressed in other

Australian cases and in particular the following passage expressed in a case of Gange v. Sullivan (1966) 116 CLR 441:

“Whilst the effect of a condition must in every case depend upon the language in which it is expressed and a decision upon the

meaning of one condition cannot determine the meaning of a different condition, the authorities cited do show a disposition on

the part of the courts to treat non-fulfilment of a condition such as that here under consideration as rendering a contract

voidable rather than void in order to forestall a party to a contract from gaining some advantage from his own conduct in

securing or contributing to the non-fulfilment of a condition bringing the contract to an end. Accordingly … we are prepared to

treat the non-fulfilment of the condition as rendering the contract voidable rather than void.”

32. Mason J. also makes it clear that, in his view, the time clause would not be self-executing and that the party relying on it would

have to rescind. Indeed, that appears to have been the view of all the judges. As there is no authority requiring this court to hold

otherwise, I have likewise taken the same view as the Australian courts endorsed in English cases also that non-fulfilment of the

condition within the time stipulated renders the contract voidable rather than void. This would seem to me to be especially sensible in

the Irish context. I think that two Irish solicitors dealing with each other on a sale would naturally assume that if one was going to

treat the contract as at an end because of the breach of the condition he would so inform the other and that it is reasonable to imply

such an obligation. This observation is necessarily obiter as the question was not argued in the light of counsel’s concession.

33. I would allow the appeal. I would answer the questions in the manner suggested by McCracken J. in his judgment.