Smelter Corporation of Ireland Ltd. v. O'Driscoll [1977] IESC 1; [1977] IR 305 (29th July, 1977)

[ Home ] [ Databases ] [ World Law ] [ Multidatabase Search ] [ Help ] [ Feedback ] [ DONATE ] Supreme Court of Ireland Decisions You are here: BAILII >> Databases >> Supreme Court of Ireland Decisions >> Smelter Corporation of Ireland Ltd. v. O'Driscoll [1977] IESC 1; [1977] IR 305 (29th July, 1977) URL: https://www.bailii.org/ie/cases/IESC/1977/1.html Cite as: [1977] IR 305, [1977] IESC 1 [ New search ] [ Printable RTF version ] [ Help ] Smelter Corporation of Ireland Ltd. v. O'Driscoll [1977] IESC 1; [1977] IR 305 (29th July, 1977) Supreme Court Smelter Corporation of Ireland Limited (Plaintiff) v. Abina Mary O’Driscoll (Defendant) No. 1159 P of 1973 [29 th of July, 1977] Status: Reported at [1977] IR 305 O’Higgins C. J. 1. This is an appeal brought by the plaintiffs from the decision and judgment of Mr. Justice Butler refusing their claim for specific performance of an agreement entered into by the defendant for the sale to them of 55 acres 0 roods and 36 perches of land situate at Carrigrenan in the county of Cork. 2. The plaintiffs are a limited liability company formed for the purpose of establishing in Ireland a smelter or base-metal reduction plant. At the time of the agreement sought to be enforced, the plaintiffs were engaged in the acquisition of land as a suitable site for such a plant in the Little Island area of Cork. The defendant is the owner of the land which is the subject of the agreement, but the negotiations in relation to the agreement were conducted on her behalf by her husband, Michael O’Driscoll, and later by her solicitor who has since died. The agreement necessarily took the form of an option to purchase, and was dated the 25th November, 1969. 3. Under the agreement the plaintiffs, in consideration of the payment of £7,000, were given for 12 months an option to purchase at a price to be determined by Mr. Owen MacCarthy (the well-known arbitrator to the Land Values Reference Committee) on an arbitration specially held for that purpose. Provision was made for the extension of the option for a further period of six months on the payment of a further sum of £3,250 and there were other clauses which are not relevant to the issues raised in this appeal. In the event of the option being exercised, it was provided that the option payments should be credited against the purchase money and, if the option was not exercised for any of the three grounds set out in clause 9, it was provided that one-half of such sums should be returned to the plaintiffs and that, in the meantime, such one-half should be secured on deposit. On the 10th January, 1970, Mr. Owen MacCarthy determined in his arbitration award that the purchase price of the land should be at the rate of £1,500 per acre, which resulted in a purchase price of £82,837.50. 4. By letter dated the 23rd November, 1970. the plaintiffs took a second option for six months for the sum of £3,250 which was thereupon paid to the defendant’s solicitor. A third option for six months was then purchased by the plaintiffs as a result of negotiations between the auctioneer acting for the plaintiffs, Mr. Ahern, and the defendant’s solicitor. The consideration for this option was also £3,250, but this sum was not to be credited against the purchase money should the plaintiffs exercise the option. At the expiration of the third option, a fourth was negotiated as is evidenced by a letter dated the 24th November, 1971, from the defendant’s solicitor to the plaintiffs. This option was for a further six months for a nominal consideration but on the terms that the option monies paid under the original option should now be freed to the defendant and should not be credited against the purchase money in the event of the option being exercised. In effect, this arrangement constituted the ground of a fresh option to purchase for a fixed price of £93,087.50 being £82,837.50 as fixed by Mr. MacCarthy, plus the £10,250 paid in respect of the options under the agreement of 25th November, 1969. By letter dated 15th May, 1972, the plaintiffs purported to exercise this final option. The defendant was unwilling and refused to complete and these proceedings were commenced by the plaintiffs seeking specific performance of the agreement to sell, and associated relief. 5. The defence to the plaintiffs’ claim is based on two main grounds. In the first place it is contended at paragraph 3 of the defence that the option or options to purchase were given by the defendant “subject to a condition precedent that a smelter plant otherwise a base metal reduction plant would be built on the said lands and that the said lands would be used for no other purpose but the plaintiffs do not propose to build or utilise a smelter plant or base metal reduction plant on the said lands and the said condition precedent to the exercise of the said option has not been fulfilled and will not be fulfilled and the plaintiff is thereby debarred from exercising the said or any option.” 6. At paragraph 4 of the defence it is also contended with regard to the option that “the same was obtained from the defendant under duress and coercion whereby the plaintiffs caused or permitted a local authority to clearly give her to understand that if she did not sell the said lands or give an option over the same to the plaintiffs for the purpose of a smelter plant or base metal reduction plant, then the said lands would be acquired by compulsory acquisition by the said local authority and given to the plaintiffs for the stated purpose, and the defendant believed that this threat would be carried out to her damage and it was further represented to the defendant that she had a national and patriotic duty to permit employment on a large scale to be afforded by the plaintiffs at the said smelter plant or’ base metal reduction plant and it was in those circumstances and only on the understanding and pre-condition, express or implied, as hereinbefore indicated, that the defendant afforded such option to the plaintiffs.” 7. To assess the validity of these two grounds of defence or of either of them, regard must be had to the evidence adduced at the trial before the learned High Court judge. Apart from the documents already referred to which relate to evidence of the option arrangements entered into between the parties. it appears that much happened before these arrangements became possible. The plaintiffs had engaged Mr. Ahern (the principal of Marsh & Co., auctioneers) to conduct negotiations on their behalf with local land owners including the defendant. 8. On behalf of the plaintiffs Mr. Ahern interviewed the defendant’s husband and offered £800 per acre for the land which was subsequently the subject of the options. Believing that the Cork County Council as the planning authority had power under s. 77 of the Local Government (Planning & Development) Act, 1963, to acquire these lands compulsorily for the development contemplated by the plaintiffs, and further believing that, as a matter of probability, this power would be exercised, Mr. Ahern so informed the defendant’s husband. He did this in good faith, as the learned trial judge has found, believing his statement to represent the reality of the situation facing the defendant. Mr. Ahern followed up this verbal statement with a letter dated the 11th August, 1969, which was written to the solicitor acting for the defendant. in this letter he again made an offer of £800 per acre but added:— “We are suggesting that, since the probability of a compulsory purchase order being made is admitted, the necessity of having the order made be dispensed with and that the value of the land be submitted to an independent arbitrator acceptable to both parties, and that both parties be bound by his decision.” This letter was a clear indication of Mr. Ahern’s view, as the negotiator on behalf of the plaintiffs, that if the £800 per acre was not acceptable the defendant ought to agree to the price being determined by an independent arbitrator in order to avoid a compulsory purchase order. 9. It seems clear that the defendant’s solicitor did not doubt for a moment the soundness of the view expressed by Mr. Ahern, and that subsequent negotiations were conducted on the basis that, if agreement was not possible, compulsory purchase would be the next step. 10. It appears that Mr. Filer, the managing director of the plaintiffs, was made aware of the manner in which Mr. Ahern was negotiating with the defendant, and of the arguments and representations he used and made. This appears from the fact that at the end of August, 1969, Mr. Filer was given Mr. Ahern’s complete file of correspondence which included the letter of the 11th August. 11. Despite the efforts of Mr. Ahern, the defendant, through her husband, could not be persuaded to sell although the offer made on behalf of the plaintiffs was substantially increased. 12. By the 9th October, 1969, all negotiations had come to an end and the possibility of the plaintiffs securing the defendant’s lands by agreement seemed remote in the extreme. On that date a number of people, representing the plaintiffs, called to the County Hall in Cork which is the headquarters of the Cork County Council. These included Mr. Filer, the managing director and Mr. Ahern, the auctioneer. They there met the county manager, Mr. Conlon, the chairman of the County Council, Mr. Michael Pat Murphy, the vice-chairman, Mr. Denis O’Sullivan, and the development officer, Mr. David Murphy. There appears to have been some slight conflict in the evidence at the trial as to the immediate purpose of this meeting. However, it is clear that following this meeting the county manager, the chairman, the vice-chairman, Mr. Ahern and the development officer went in a body to see the defendant’s husband for the purpose of urging him to resume negotiations with the plaintiffs for the sale of the land. There was again a conflict in the evidence at the trial as to what was said at this interview with the defendant’s husband. The defendant’s husband maintained that it was made clear to him by the gentlemen who called to see him that, if he was not willing to sell, the lands would be acquired compulsorily by the County Council. This was disputed by the County Council witnesses. However, the learned trial judge was satisfied that at this interview there had been a reference to the compulsory purchase of the lands and that this, coupled with what had previously been said and written by Mr. Ahern, operated on the mind of the defendant’s husband. This, of course, is a finding of fact by the learned trial judge which is binding on this Court. 13. On the following day the defendant’s husband telephoned the development officer to say that he was prepared to negotiate with the plaintiffs, and the agreement was executed on the 25th November, 1969. 14. At the trial it was made clear by the county manager when he gave evidence that the belief held and expressed by Mr. Ahern was incorrect. The county manager made it perfectly clear in his evidence that there was no question of the County Council acquiring these lands for the plaintiffs. Whatever views he may have had as to the Council’s powers in this respect. he said that such an exercise of compulsory acquisition had never been attempted and certainly was neither planned nor contemplated in this case. From this it follows that all suggestions made to the defendant’s husband, to the effect that if the lands were not sold voluntarily they would be acquired compulsorily, were ill-founded. 15. I now turn to the grounds relied on by the defendant for resisting the order for specific performance claimed in this case. I wish to say at once that I find no substance in the first ground of objection. In my view, the purpose for which the plaintiffs sought to purchase lands or the use to which they intended to put them in no way affected the transaction. I can see no basis for suggesting that the proposed acquisition of the defendant’s lands depended on the smelter project proceeding. 16. However, the second objection must be viewed in a different light. Specific performance is a discretionary remedy. The discretion to grant or refuse the relief must be exercised in a manner which is neither arbitrary nor capricious but which has regard to the essential fairness of the transaction involved. In effect, it is here suggested that the defendant was coerced or forced into granting the option or options to the plaintiffs by the threat of compulsory purchase. It does not seem to me on the evidence that a threat, as such, was ever used. At the same time it seems perfectly clear that the defendant was at a serious disadvantage. 17. The defendant’s husband, who acted for her throughout the negotiations, believed that if there was not a voluntary sale there would be a compulsory acquisition of the lands. lie so believed because he was told this by the plaintiffs’ agent, Mr. Ahern. it is quite clear that this view was repeated to him by the defendant’s solicitor, and on the 9th October, 1969, further corroboration was provided by those who came to see him and who represented Cork County Council. Believing this to be the situation, there was no real purpose in refusing to sell or to give an option once, as was suggested, the price was to be determined by an agreed arbitrator. To refuse in these circumstances meant acquisition anyway, and the determination of the price by an arbitrator in whose appointment the defendant might have no say. It now transpires that the situation was not as was intimated to the defendant’s husband. it is now clear that, at the time that these negotiations were proceeding, the County Council had no plans whatsoever to interfere by way of the compulsory acquisition of the defendant’s lands. 18. It is well established that the discretion to grant specific performance should not be exercised if the contract is not equal and fair. In this instance the defendant was under a fundamental misapprehension as to the true facts. This misapprehension was brought about by the plaintiffs’ agent, Mr. Ahern. While Mr. Ahern acted bona fide, this does not alter the situation which he created. He led the defendant’s husband and her solicitor to believe that, if the defendant did not agree to sell, the lands would be acquired. It appears clear also that the plaintiffs’ managing director was aware of the true position so far as compulsory acquisition was concerned. It is to be noted that he had Mr. Ahern’s file of correspondence and, therefore, should have been aware of the incorrect picture which Mr. Ahern had painted. Nevertheless, the plaintiffs’ managing director allowed the negotiations to proceed. 19. In these circumstances it appears to me that there was a fundamental unfairness in the transaction. The defendant agreed to sell believing that she had no real option, and the plaintiffs accepted her agreement to sell knowing that this was not so. In my view it would create a hardship and would be unjust to decree specific performance in this case. I agree with the decision of the learned trial judge. I would refuse specific performance but would order that all monies paid to the defendant by the plaintiffs be returned to the plaintiffs by the defendant. Kenny J. I agree. Parke J. 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