Clarion Quay Management Company CLG v. Dublin City Council  IEHC 811
by Shauna Keniry BL
Summary: General condition 36(d) of the Law Society General Conditions of Sale (1995 edition) was not expressly disapplied by the terms of a management company agreement in respect of a large mixed-use development comprising both retail and residential units. Certain alleged implied terms relating to the completion of the development and the standard and quality of works on the development were not implied by law into the management company agreement, and nor were such alleged terms implied on the facts. The Circuit Court has exclusive jurisdiction under section 26 of the Multi-Unit Developments Act 2011 (the 2011 Act) to make orders under section 24 of the 2011 Act to enforce any rights conferred, or obligation imposed by the 2011 Act. In a dispute that related to a “multi-unit development” within the meaning of the 2011 Act, a plaintiff was not precluded from maintaining any other cause of action, whether in contract or under a statutory provision other than the 2011 Act, in proceedings in the High Court, to the extent that that cause of action was not one based on rights which were conferred or obligations which were conferred by the 2011 Act in respect of which the Circuit Court had exclusive jurisdiction. Sections 7, 9(2), 31(2) and Schedule 3 of the 2011 Act did not have retrospective effect.
Topics covered: trial of preliminary issues in proceedings entered into the Commercial Court – Multi-Unit Developments Act 2011 – principles of contractual interpretation – contractual terms implied by law and by fact – jurisdiction of the Circuit Court and the High Court under sections 24, 26 and 29 of the 2011 Act – retrospective effect of the 2011 Act – sections 7, 9(2), 31(2) and Schedule 3 of the 2011 Act
- The proceedings related to a mixed-use development (comprising both residential and retail units) known as Clarion Quay located in Dublin 1 (the Development), involving the following parties:
- The plaintiff (Clarion) was the owners’ management company in respect of the Development.
- The first defendant (DCC) was the statutory successor in title of the Dublin Docklands Development Authority (DDDA). DCC was the registered owner of the lands on which the Development had been constructed, and the entity in which legal title to the reversionary interests in retail and residential leases granted from the Development, the common areas in the Development and any of the unlet areas in the Development was currently vested.
- The second to seventh defendants were members of a partnership known as the Campshire Partnership (Campshire) which was the developer – together with DDDA – in respect of the Development. Campshire also claimed beneficial ownership of certain retail units and car parking spaces in the Development.
- The relationship between the parties was governed by two main agreements:
- A joint venture agreement (JVA) dated 21 March 2000 which had been entered into by DDDA and Campshire for the construction of the Development.
- A management company agreement (MCA) dated 13 July 2001 entered into by Clarion and DDDA (and a further entity known as the North Wall Quay Partnership) in respect of the Development. DCC had succeeded to the rights and obligations of the DDDA under the MCA.
- Under the MCA, on a date either 28 days after the completion of the sale of the last of the apartments and retail units, or within a period 21 years from the date of the MCA expiring in July 2022 (whichever was the earlier), Clarion was to become the owner of the reversionary interests in the retail and residential leases granted, and common areas in the Development.
- Clarion claimed that there were multiple defects in the design, construction and certification of the Development, for which DCC and Campshire were responsible.
- On 4 July 2019, Quinn J., directed the trial of four preliminary issues under O. 25, r. 1 of the Rules of the Superior Courts 1986 (RSC), which may be summarised as follows:
- Whether DCC was bound by general condition 36(d) of the Law Society General Conditions of Sale (1995 edition) (the 1995 General Conditions).
- Whether certain terms relied on by Clarion were implied terms of the MCA.
- Whether Clarion was entitled to rely on the Multi-Unit Developments Act 2011 (the 2011 Act) in these High Court proceedings.
- If so, whether DCC and Campshire were required, under the 2011 Act, to complete the development of the common areas of the Development and indemnify Clarion against claims in relation to works completed on the Development.
- The court’s consideration of those preliminary issues was largely based on the pleadings (including certain documents appended thereto) and a statement of facts agreed between the parties for the purpose of the preliminary hearing only.
- The factual and legal matrix of the dispute was complex, and the following summary is set out by way of high-level overview only.
Issue 1 – Incorporation of General Condition 36(d) of the 1995 General Conditions
- In the context of its claim against DCC and Campshire in respect of alleged defective construction of the Development, Clarion sought to rely on Clause 10 of the MCA, which it contended incorporated general condition 36(d) of the 1995 General Conditions into the MCA.
- Clause 10 of the MCA provided that:
“Save insofar as same are inconsistent herewith that the Law Society General Conditions of Sale (1995 edition) shall apply to this sale. In the event of any inconsistency between presents and the said General Conditions these presents shall prevail.”
- General condition 36(d) provided that, “[u]nless the Special Conditions contain a stipulation to the contrary” the vendor would warrant that there had been substantial compliance with the provisions of the Building Control Act 1990 or of any Regulations made thereunder to the extent that they applied to the design or development of the relevant property and imposes an obligation on the vendor on or prior to completion to furnish to the purchaser a certificate or opinion confirming such substantial compliance.
- DCC and Campshire argued that general condition 36(d) was inconsistent with, inter alia, Clause 4 of the MCA, which included wording to the effect that DCC “shall not be under any obligation to complete or cause to be completed such development and may alter such development as it may wish”, and that there was reserved to DCC “full right and liberty to alter such development or to discontinue developing the Estate and to exclude such works and erections thereon or any part thereof”.
- Barniville J. outlined the legal principles governing the construction or interpretation of contracts in Irish law, in particular the “text in context” approach adopted following judgments of the Supreme Court in Law Society of Ireland v. Motor Insurers Bureau of Ireland  IESC 31 and Jackie Greene Construction Ltd v. Irish Bank Resolution Corporation  IESC 2. He discussed the extent to which recourse could be had to “commercial common sense” in interpreting contractual documents, highlighting, by reference to the relevant authorities, the principle that a court should not, in order to give commercial efficacy to a contract, force a meaning on the language or words of a contract that those words would not otherwise bear.
- Barniville J. ultimately concluded that the terms of the MCA, did not contain a stipulation which disapplied general condition 36(d). Section 36(d) was not “inconsistent” with either Clause 4 of the MCA within the meaning of Clause 10, or with any of the other clauses in the MCA relied on by DCC and Campshire.
Issue 2 – Alleged terms implied by law and by fact
- Clarion argued that the MCA contained a number of alleged implied terms, including that DCC would ensure the completion of the Development, that, as regards both the work completed, and the work which remained to be completed at the date of the MCA, the Development would be reasonably fit for immediate occupation, that any work which remained to be done would be completed in a good and workmanlike manner with sound and suitable material, and that that the Development would be constructed in a “first class state of decorative repair and condition”.
- Clarion argued that such alleged terms were implied both by law and on the facts.
- Barniville J. rejected Clarion arguments based on the judgment of Davitt P. in Brown v. Norton  I.R. 35 holding that the principle in Brown allowed terms of the type relied on by Clarion to be implied only in very limited circumstances reflecting the particular facts of that case, i.e. where there is an agreement to purchase a house which is in the course of being built and where it is clearly agreed and understood by the parties that what the purchaser is agreeing to buy and what the vendor is agreeing to sell is a dwelling house in which the purchaser can live as soon as the house is completed by the vendor. The transaction between Clarion, DCC and Campshire was self-evidently not a transaction of this nature.
- Considering whether terms of the type relied on by Clarion were implied on the facts, Barniville J. applied the five-point test set out by Lord Simon in the judgment of the Privy Council in BP Refinery (Westernport) Pty Ltd. v. Shire of Hastings (1977) 180 C.L.R. 266, as approved in the judgment of Finlay Geoghegan J. Flynn v. Breccia  IECA 74. Barniville J. also had regard to certain observations on the five-point test in BP Refinery in the judgment of Lord Neuberger in Marks & Spencer plc v. BNP Paribas Securities Services  A.C. 742.
- The five-point test outlined in BP Refinery was that a court must consider whether the terms to be implied on the facts are (a) reasonable and equitable, (b) necessary to give business efficacy to the contract, (c) so obvious that it goes without saying, (d) capable of clear expression, and (e) do not contradict any express term of the contract. Barniville J. was not satisfied that the terms relied on by Clarion satisfied those conditions.
- In respect of point (c) of the BP Refinery test, Clarion had relied on the fact that the JVA between DCC and Campshire contained, in Clause 5.1, an express requirement that Campshire would build in a good and substantial manner and in accordance with the Building Regulations, as suggesting that a similar term ought to be implied in the MCA. However, taking into account that, at time the MCA was agreed, DCC and Clarion (which was incorporated by Campshire in accordance with its obligations under the JVA) would both have been aware of Clause 5.1 of the JVA, Barniville J. considered it much more likely that, rather than having accidentally omitted such a term from the MCA, the parties simply did not regard it as necessary or appropriate to include it in the MCA, having regard to the nature of that agreement. Further, in relation to both points (c) and point (e) of the BP Refinery test, Barniville J. noted that the alleged implied term requiring DCC to ensure the completion of the Development would be inconsistent with Clause 4 of the MCA, which made it clear that DCC did not have an obligation to complete the Development.
Issue 3 – Interpretation of sections 24, 26 and 29 of the 2011 Act
- This issue concerned the entitlement of Clarion to rely on the 2011 Act in the High Court proceedings against both DCC and Campshire. Clarion had a contractual relationship with DCC under the MCA, but did not have a relevant contractual relationship with Campshire. The 2011 Act was relied on by Clarion to advance a claim against Campshire in circumstances where it would not otherwise have had an entitlement to do so prior to the enactment of the 2011 Act by reason of the doctrine of privity of contract.
- Barniville J. observed that, while Issue 4 appeared to be predicated on an assumption that DCC and Clarion are both “developers” within the meaning of section 1 of the 2011 Act, that issue was in dispute between the parties, and it was expressly agreed that the High Court had not been directed to decide that dispute as part of the trial of preliminary issues at this stage. Therefore, Barniville J. noted that it could be necessary at some later stage for a court to decide whether DCC or Campshire or either of them are “developers” for the purposes of the 2011 Act.
- Clarion sought to rely on the following provisions of the 2011 Act against both DCC and Campshire:
- Section 7 – which provided that the transfer of the ownership of an interest in the relevant parts of the common areas of a multi-unit development should not relieve the person who would otherwise have been responsible from the duty, obligation or responsibility to ensure completion of the development, including, inter alia, compliance with the Building Control Acts.
- Section 9(2) – which provided for the developer to indemnify the owners’ management company in respect of all claims made against the company of whatever nature or kind in respect of acts or omissions by the developer in the course of works connected with the completion of the multi-unit development.
- Section 31(2) and Schedule 3 – which required the handover of certain documentation by the developer to the owners’ management company, including documents confirmation that the development has been completed in accordance with, inter alia, the Building Control Acts.
- Section 24 provided for applications to court for remedial orders to enforce rights and obligations conferred by the 2011 Act in relation to multi-unit developments.
- However, importantly, section 26 provided that the hearing and determination of applications under section 24 was subject to the “exclusive jurisdiction” of the Circuit Court, and that “such applications shall not be made to the High Court”.
- Clarion argued nevertheless, by reference to section 29 of the 2011 Act, that it was entitled to advance its claims under the 2011 Act against DCC and Campshire in proceedings in the High Court. Section 29 provided as follows:
“Nothing in this Act shall be taken to derogate from any right or power which may, whether before or after the passing of this Act, be vested in any person or court, by statute or otherwise, and the powers conferred by this Act shall be in addition to, and not in substitution for, such other rights or powers.”
- Clarion also argued, by reference to a series of cases concerning statutory provisions conferring jurisdiction in particular matters on the Circuit Court, that a legislative provision conferring jurisdiction on the Circuit Court but excluding the full original jurisdiction of the High Court was to be construed strictly. This argument was not accepted by Barniville J.
- Barniville J. identified that Issue 3 concerned the proper interpretation of sections 24, 26 and 29 of the 2011 Act, but also Article 34 of the Constitution and the full original jurisdiction conferred on the High Court by Article 34.3.1 of the Constitution. The High Court considered a number of relevant authorities, including Tormey v. Ireland  IR 289, Deighan v. Hearne  I.R. 603, Kenny Homes & Co Ltd. v. Leonard (Unreported, Supreme Court, 18th June, 1998) and South Dublin County Council (No. 2)  2 I.R. 696. In addition, Barniville J. made reference to In Re Lance Investments Ltd (In Liquidation)  IEHC 444 in which Baker J. had specifically considered the interpretation of section 24 of the 2011 Act.
- Barniville J. concluded in relation to sections 24 and 26 that the clear intention of the Oireachtas in enacting the 2011 Act and in conferring the very wide powers on the Circuit Court to grant remedial orders under section 24 was that such matters will be dealt with in the Circuit Court. Even in the absence of such clear and explicit terms, the authorities demonstrated that the High Court should be reluctant to deal with a matter for which the Circuit Court is the designated court unless there is a particular urgency or it is clear that the relevant application could not succeed in the Circuit Court. Notwithstanding the provisions of s. 26 conferring exclusive jurisdiction on the Circuit Court, the High Court retained its full original jurisdiction by way of judicial review.
- Interpreting section 29 of the 2011 Act, Barniville J. considered that, while the provision was difficult to construe, it was intended to enable reliance on rights or powers in addition to, and not in substitution for, the rights conferred by the 2011 Act.
- The result of the analysis under Issue 3 was as follows:
- The effect of section 29 of the 2011 Act was that it was open to Clarion to maintain its claim in contract and, to the extent that it seeks to do so, to maintain a claim for damages for breach of other statutory provisions apart from the 2011 Act in the High Court proceedings. However, insofar as Clarion sought to rely on the 2011 Act in respect of a claim against DCC it had to make that case in the Circuit Court which, by virtue of section 26 of the 2011 Act, had exclusive jurisdiction.
- By contrast, Clarion had no contract with Campshire which predated or post-dated the coming into force of the 2011 Act. To the extent that Clarion maintained a claim for damages for breach of other statutory provisions apart from the 2011 Act in the High Court proceedings, it could do so in principle. However, for the same reasons as applied to Clarion’s case against DCC, insofar as Clarion wished to rely on the 2011 Act to support its claim against Campshire, it had to make that case in the Circuit Court and not in the High Court.
Issue 4 – Whether the 2011 Act had retrospective effect
- This issue arose in circumstances where the relevant contracts between the parties (including the MCA and the JVA) were entered into approximately ten years before the 2011 Act came into force, and where the apartments in the development, and at least some of the retail units, were sold between 2001 and 2006.
- Clarion argued that, on its face, the 2011 Act and in particular sections 7, 9(2), 31(2) and Schedule 3 were intended to have retrospective effect, and that many of its provisions distinguish in their terms between developments at various different stages of development. DCC and Campshire accepted that while sections 4 and 5 of the 2011 Act operate retrospectively to affect existing contracts with respect to the transfer of the common areas, otherwise the 2011 Act could not be considered to have retrospective effect.
- Barniville J. observed that the most relevant authority relating to the retrospectivity of the 2011 Act was the judgment of Baker J. in In Re Lance Investments Ltd (In Liquidation)  IEHC 444 in which the High Court considered the dicta of the Supreme Court in Hamilton v. Hamilton  IR 466 and Minister for Social Community and Family Affairs v. Scanlon  1 I.R. 64 that there was a presumption against retrospective effect of legislation, but that presumption was not absolute and could be displaced by clear words in the statute, or by necessary inference.
- Barniville J. also referred to Sweetman v. Shell E&P Ireland Ltd.  1 I.R. 742, where Charleton J. had distinguished between substantive and procedural changes effected by legislation. Procedural changes, such as alterations to forms of procedure or the admission of evidence, did not involve vested rights and the presumption against retrospective operation did not apply to such provisions. In this connection, Barniville J. noted that Clarion had sought to argue that the 2011 Act would allow Clarion to maintain a claim against Campshire to enforce the obligations owed by Campshire to DCC under the JVA where, owing to privity of contract, it could not previously have done so, and that such a change was procedural rather than substantive in nature.
- Having considered the principles applicable to the retrospective effect of statutory provisions and in particular the judgment of Baker J. in In Re Lance Investments Ltd (In Liquidation)  IEHC 444, Barniville J. determined that none of the sections of the 2011 Act on which Clarion relied had retrospective effect. In particular, the court considered that, if Clarion was correct, that the effect of the 2011 Act was that it could now exercise contractual rights and enforce contractual obligations against Campshire which it could not have done previously, that change was not merely procedural, but rather a radical substantive change. Barniville J. observed that none of sections 7, 9(2), 31(2) and Schedule 3 expressly stated that those sections were to have retrospective effect, and nor did same arise by necessary inference. Sections 7 and 24 of the 2011 Act in particular were not intended generally to create new obligations.
- As the High Court had concluded that sections 7, 9(2) 31(2) and Schedule 3 did not have retrospective effect, the remaining matters arising under Issue 4 did not strictly arise for determination. However, in the event that an appellate court determined that he was incorrect on the retrospectivity issue, Barniville J. went on to set out his view as to why Clarion’s reliance on sections 7, 9(2) and 31(2) and schedule 3 was nonetheless misplaced.
- The judge considered, in particular, that section 7 did not have the effect contended for by Clarion of requiring the Development to be completed by DCC and Campshire in accordance with the Building Regulations. Section 7, he considered, did not create any new obligations other than those already existing between Clarion and DCC in the MCA and DCC and Campshire in the JVA.
- Further, with regard to section 9(2), Barniville J.’s view was that, having regard to its context, section 9(2) and the indemnity provided in that section was intended to cover a situation where a claim is made against the owners’ management company in respect of alleged acts or omissions by the developer while it is carrying out works to complete the development in the circumstances envisaged in section 9(1) – that is, where the transfer of the common areas of a multi-unit development has occurred but where further works are necessary to enable the development to be completed. Section 9(2) was not a free-standing indemnity, and must be seen in its context. An indemnity of the type contended for by Clarion would have gone beyond any of the contractual obligations on DCC and the MCA and on Campshire in the JVA, and could not have operated retrospectively.
- Finally, in respect of sections 31(2) and Schedule 3, Barniville J. considered that, aside from his view that those provisions were not retrospective, the obligation contained in those provisions could not, in any event, arise until the “development stage” had ended. On Clarion’s case, that point had not yet been reached. Further, Barniville J. considered that section 31(2) and Schedule 3 were directed to the handing over of title-related documents on the completion of a development and did not impose a duty on the developer to carry out substantive works in order to generate the confirmations or the other documents referred to in the Schedule.
Comment: This comprehensive judgment of the Commercial Court was delivered in respect of the trial of four agreed preliminary issues and in circumstances where there were other proceedings between the parties in both the High Court and the Circuit Court. While the court expressed some reservations as to the appropriateness of selecting these four issues from the range of issues in dispute between the parties, as it was “highly doubtful that a selection of these issues will ultimately lead to a significant shortening of the case”, nevertheless the court was satisfied that it could determine the four issues set out in the Order. The judgment demonstrates the application of the principles of contractual interpretation in Irish law to a complex management company agreement incorporating the Law Society General Conditions of Sale (1995 edition), as well containing detailed discussion of the law on implication of terms by law and by fact into commercial contracts. The judgment also addresses the interpretation Multi-Unit Developments Act 2011, confirming in particular the exclusive jurisdiction of the Circuit Court to make orders to enforce rights or obligations conferred by the 2011 Act, and clarifying the types of cause of action which may arise out of a dispute relating to multi-unit development which may be maintained in High Court proceedings. It further discusses the interpretation and temporal scope of several key provisions of the 2011 Act.