Contract based on undermining planning code cannot be enforced

Kelly -v- Simpson: High Court. Judgment delivered by Mr Justice Charleton on December 1st, 2008

Judgment

A contract based on a price that would not have been achieved but for representations designed to undermine the planning code should not be enforced.

Background

The plaintiff, Vincent Kelly, was seeking the specific performance of a contract by the defendant to buy land near Schull, Co Cork.

Mr Justice Charleton said that the fundamental ingredients in a contract for the sale of land were that the parties be identified as vendor and purchaser, the land be identified with substantial precision and that the price be agreed.

Normally the motivation for any person selling or buying land is irrelevant, but where the specific performance of a contract is concerned it is crucial, and here he was being asked to exercise the equitable jurisdiction of the court to compel the defendant to purchase the land at the price agreed.

The property was about 2.5 acres above the town of Schull on which there was an existing bungalow and an old stone ruin. It overlooked the town of Schull and the islands of Sherkin and Oileán Chléire. Mr Kelly said he bought it in December 2006, through local auctioneer Martin Swanton, with the intention of selling it as a development site.

The purchaser, Mr Simpson, was attracted by its development potential, and Mr Swanton, who was representing Mr Kelly during the sale, presented it to him as capable of development by demolishing the existing bungalow and replacing it with an "executive residence" and of fitting two more houses on it.

In May 2007 Mr Swanton approached Mr Simpson and told him the property was for sale for €1.5 million.

Mr Simpson agreed to buy it, and signed a form registering his interest, but did not pay the €150,000 deposit.

An architect's report drawn up for Mr Simpson stated that the development plan for the area Planning legislation does not exist as a fig leaf that can be treated with disregard by anyone sought to focus development in towns while providing for "the genuine needs of locals wishing to live in the rural area in which they were bought up." The report also indicated that the site was in a scenic amenity zone.

In relation to ruinous dwellings it stated that the development of such buildings would not be prevented in "appropriate cases". The report considered one additional dwelling might be permitted on the site.

Contracts were exchanged, but not signed, as there were a number of postponements of the closing date. A completion notice was served on January 9th and a further one on February 26th 2008.

Mr Justice Charleton said he had to consider how the price of €300,000 per half-acre for land in a scenic part of rural Ireland came about. In uncontested evidence Mr Swanton had told Mr Simpson that the local authority planner for the area had said she would allow three houses on the site.

Mr Swanton's proposal for the development of the site was to replace the roof on the ruin in order to make it a redevelopment building in the eyes of a planner; to redevelop the existing dwelling as an "executive residence"; and to apply for planning for a residence in a part of the site covered by trees and scrub in the name of a local person claiming a housing need, whom he would provide. He reasoned that the first would cost approximately €250,000 to develop and would yield approximately €1 million; the second would cost approximately €450,000 to develop and would yield approximately €1.8 million and the third would cost about €300,000 to develop, but would take approximately five years to sell because of the planning restrictions which required the involvement of a local person.

"There is no doubt that the selling agent on behalf of the plaintiff, Mr Swanton, was very well aware from the first meeting with the defendant as potential purchaser of the planning restrictions in this area," Mr Justice Charleton said.

"The price at this high monetary level was achieved through inducing the defendant to partially transform an old ruin . . . with the intention of making it appear to the planning authorities that it was a substantial roofed and ruined, though uninhabited, dwelling."

Mr Justice Charleton also referred to an exchange of e-mails between Mr Swanton and Mr Simpson in which the former said he thought he had found a local for the adjoining site.

Decision

Mr Justice Charleton stated that the planning code existed for the purpose of ensuring that one of our most valuable economic resources, the Irish countryside, should be maintained. Where the Oireachtas has formulated a legislative policy on planning, and local government had exercised devolved powers to set out a county plan on how the countryside is to be developed, the courts are bound to respect it.

"Planning legislation does not exist as a fig leaf that can be treated with disregard by anyone," he said. "If approaches to the planning process are not honest, then it is fundamentally undermined. Such attitudes are destructive of the rule of law."

He said the price was essential to the formulation of any valid contract for the sale of land. "I have no doubt that the price in this instance would never have been achieved by the plaintiff, through his agent, had the defendant not been induced to consider it as being more valuable than it in fact was by specific representations designed to undermine the planning code" he said.He refused the court's aid to enforce the contract.

The full judgment is on www.courts.ie

Gavin Ralston SC and Joanna Kelleher BL, instructed by Séamus Hickey of Hickey Fitzgerald, for the applicant; Justin Dillon SC and Hugh O'Flaherty BL, instructed by Gary Kingston of Kingston and Co, for the respondent.

Irish Times

www.buckplanning.ie