The Minister for Communications & Ors -v- Figary Watersports Development Company Ltd [2010] IEHC 541 (03 September 2010)

Judgment Title: The Minister for Communications & Ors -v- Figary Watersports Development Company Ltd

Neutral Citation: [2010] IEHC 541

High Court Record Number: 2005 3374 P

Date of Delivery: 03/09/2010

Court: High Court

Composition of Court:

Judgment by: McKechnie J.

Status of Judgment: Approved

Neutral Citation [2010] IEHC 541

THE HIGH COURT

Rec. No.: 2005 / 3374 P

Between:

THE MINISTER FOR COMMUNICATIONS, MARINE AND NATURAL RESOURCES

Plaintiff

-and-

FIGARY WATERSPORTS DEVELOPMENT COMPANY LIMITED

Defendant

JUDGMENT of Mr. Justice William M. McKechnie delivered on the 3rd day of September 2010

1. This action arises out of a lease made between the Plaintiff, as lessor, and the Defendant, as lessee, for a term of 99 years from the 1st January 1993, in relation to lands in Co. Donegal, upon which the Defendant was to construct a marina. The Plaintiff claims that since the commencement of the lease the Defendant has failed, neglected and omitted to pay and discharge the rent thereby reserved. Up to and including the 1st January 2009, rent in the sum of €206,749.28 remained due and owing, the Defendant having paid only four instalments since May 2006 totalling €136,080. The Plaintiff seeks to rely on a Notice of Forfeiture dated the 12th June 1998, upon which, inter alia, these proceedings were issued and on foot of which re-entry is sought. Furthermore, it is claimed that the lessee is in breach of covenants contained in the lease and in other agreements subsequently made. The Defendant denies the same, seeks relief against forfeiture, and is countersuing, alleging breaches of covenant/conditions by the Plaintiff, in particular with regards to the unreasonable withholding of authority and consents required, or else such were only furnished with significant delay. It also seeks damages on what is known as the “Interreg issue”.

Background:
The Lease:-

2. In the late 1980s, negotiations were commenced with the Plaintiff Ministry (“the Minister” or “the Department” as may be appropriate) to obtain a foreshore licence to develop a marina at Fahan, Co. Donegal, approximately 10 miles from the town of Buncrana. The Defendant company (“Figary”) was incorporated following these events on the 2nd March 1989. On the 22nd August 1990 the Defendant took an assignment of a lease dated the 9th June 1980 (“the Yacht Club lease” or “the Lough Swilly lease”) over a plot comprising approximately 8 acres, for a term of 99 years from the 1st June 1980, with an annual rent of IRŁ200, subject to seven yearly reviews. Nothing in particular turns on this lease; all rent owed in respect of it having been paid.

3. An application for planning permission for a marina development was successfully made by the Defendant to Donegal County Council on the 14th July 1989. On the 8th February 1990 the grant was upheld by An Bord Pleanála, subject to certain conditions. It is claimed that this planning permission lapsed on the 8th February 1995, five years after its grant, and required renewal at a later date.

4. The Defendant went into possession of the property, by agreement of the parties, on the 1st January 1993. A lease was subsequently agreed on the 26th April 1993 (“the lease” or “the 1993 lease”). This lease is now the principal subject matter of the action herein.

5. The 1993 lease relates to an area of 10 hectares of foreshore, and is made under s. 2 of the Foreshore Act 1933. The demised lands are identified in a map attached to the lease and are described in the First Schedule thereto. The lease specifies the purpose of the lease as being:

“[F]or the purpose of the construction and operation thereon of a marina in accordance with the terms and condition specified in the Second Schedule hereto.”

The tenancy is for a term of 99 years commencing on the 1st January 1993 with a rent of IRŁ18,000 per annum. However under the Third Schedule there is a scheme of remission of rent so that in year one the Defendant would only pay 20% of the rent, and would then pay an increasing amount thereafter, the remission reducing by 20% each year. Thus by the year starting the 1st January 1997 it was envisaged that the Defendant would be paying the full yearly rent.

6. Both the Plaintiff and Defendant have relied upon a number of clauses and covenants in the lease explicitly. These are:-

Clause 1:

“To pay the yearly rent hereby reserved (and any additional rent as may be defined or fixed or assessed in accordance with the provisions hereinafter contained) at the times and in the manner aforesaid.

Clause 2:

“At the expiration of the first five years of the term hereby granted and of every period of five years thereafter (hereinafter called the Review Date) the Lessor shall have the right to review the yearly rent for the time being payable hereunder on giving to the Lessee three months notice in writing prior to such Review Date of his intention so to do and if the Lessor shall give to the Lessee such notice as aforesaid then from and after such Review Date the yearly rent payable in respect of that part of the foreshore hereby demised for the respective term following such Review Date shall be the greater of:

(a) the sum payable immediately prior to the Review Date;

(b) such yearly amount as shall be agreed between the Lessor and Lessee … PROVIDED ALWAYS and it is hereby agreed that nothing herein contained shall operate to have effect so that the yearly rent for any period of the term hereby granted shall be less than Ł18,000 or than the amount of the revised rent payable in respect of any payable preceding period of the said term. The revised yearly rent payable as aforesaid in respect of any of the period herein mentioned may be agreed at any time between the Lessor and Lessee or (in the absence of agreement) be determined not earlier than the date of commencement of such period (the Review date) by an Arbitrator …”

Clause 3:

“To construct a marina (hereinafter called ‘the marina’) on the demised premises in accordance with the terms and conditions set out in the Second Schedule hereto.”

Clause 7:

“To comply with all the terms and conditions set out in the Second Schedule hereto.”

Clause 8:

“To complete the works specified in the Second Schedule hereto to the satisfaction of the Lessor within five years from the date hereof.”

Clause 9:

“To obtain the written consent of the Lessor in relation to the number of berths which can be provided and the number of vessels which can be accommodated within the marina.”

Clause 10:

“To obtain the prior written consent of the Lessor for the excavation, removal and stockpiling of beach material and the Lessor shall specify the terms and conditions under which such excavation, removal and stockpiling will be permissible.”

Clause 12:

“To restore to its former condition to the satisfaction of the Lessor in the event of the premature termination or abandonment of the works specified in the Second Schedule hereto. To ensure that the Lessee will be in a position to comply with this condition it shall, if so required by the Lessor procure a Bond from an Insurance Office of repute carrying on business in Ireland in the sum of Ł250,000 for the due performance by the Lessee of the said restoration in the event of such premature termination of the works or in the event of the unsatisfactory completion or abandonment of the said works, such Bond shall be in favour of the Lessee and shall be assigned to the Lessor if so required. The Lessee will furnish such Bond to the Lessor for inspection, if required.”

Clause 14:

“Not without the consent in writing of the Lessor being first obtained in accordance with such conditions (including the payment of additional rent) as the Lessor may impose to erect or place on the demised premises any building or works, other than those the subject matter of the Planning Permission for the construction of the marina in accordance with the Local Government (Planning and Development) Acts 1963 to 1983 which has been granted to the Lessee.”

Clause 15:

“Not to commit or suffer any waste spoil or destruction on the demised premises.”

A number of other clauses are referred to by the Plaintiff but need not be set out here in extenso, but should nevertheless be mentioned:

i) Clause 16 requires the lessee to indemnify the lessor against costs and expenses;

ii) Clause 17 is a repairing obligation;

iii) Clause 18 requires access for ministerial officials onto the site;

iv) Clause 19 deals with the cost and expenses of removing building works and materials which are dilapidated;

v) Clauses 22, 23 and 24 deal with the requirements to provide for a healthy method of dealing with sewage discharge from boats accessing the marina;

vi) Clauses 25, 26 and 27 deal with operational matters relating to the marina.

It should also be noted that nowhere in the lease does it expressly state that the lessor’s consent (where required) in relation to any of the above-mentioned clauses will not be unreasonably withheld.

7. As stated, the First Schedule contains the description of the property. The Second Schedule contains “Technical Specifications”. These include that:

“3. The structure comprising the marina erected on the foreshore shall conform with the plans and drawings to be submitted and approved by the Lessor.

4. The Lessee shall provide the Lessor with:

(i) detailed cross sections of the breakwater …

(ii) an analysis of the current regime in the creek on which the scour protection design is based;

(iii) an analysis of the likely effect of the construction of the marina on the morphology of the creek;

(iv) the Lessee shall not commence with the construction of the breakwater until the Lessor indicates that the plans, drawings and specification are satisfactory.

5. The Lessee shall be required to submit technical specification of the proposed works for the approval of the Lessor prior to the commencement of the development.

…

9. The Lessee shall provide for sage navigational access to and from the marina …”

8. Despite the contractual terms no work was carried out on the project prior to 1998 as Patrick Heaney, the main shareholder in the company, had health issues; there was thus no movement until new partners came on board. On the 12th September 1994, a civil bill was issued by the Plaintiff against the Defendant seeking arrears of rent, which at that stage had amounted to IRŁ10,800, and the payment of stamp duty. The latter was not paid until after issue of these proceedings. In December 1996 an official on behalf of the Minister, Thomas Tobin, wrote advising the Defendant that in light of the non-payment of rent and the failure to discharge stamp duty, it was intended to treat the lease as being no longer valid. However, nothing appears to have happened subsequently on foot of that letter, and matters remained in abeyance until 1998. In January 1998 the Defendant’s then solicitors, Dillon Eustace, wrote to the Chief State Solicitor’s Office indicating that their client was in funds for both the rent and stamp duty; they sought a new start date of the 1st January 1998. Neither of these payments were discharged until after the commencement of the present proceedings, with the rent arrears only being partially discharged. The Civil Bill was never processed to finality.

9. A meeting took place on the 26th February 1998 at Leinster House between, inter alia, representatives of the Defendant, namely Catherine Heaney, John McDaid and Michael McDaid, and the then Minister for the Marine, Dr. Michael Woods. What occurred at that meeting is disputed. The Defendant claims that it received permission from the Minister himself to commence works. It confirmed this understanding in a letter sent the next day, the 27th February 1998, in which the Defendant to the Minister which stated:

“Your consent for the work to commence on 2nd March was most encouraging and I trust that there will be no delay in implementing the lease finalisation.”

The Defendant also sought a reduction in the rent due since 1993.

10. The Plaintiff denies that such consent was given. On the 6th March 1998, Dr. Michael Woods T.D. replied stating:

“I wish to clarify a point raised in your letter. I did not give consent for any work to proceed. Rather, I said that I would examine the position as a matter of urgency to see what I could do to sort out the problems which had arisen in relation to the foreshore lease granted with effect from 1 January, 1993, and to revert to you as soon as I had done so. In the circumstances, no work should proceed until matters concerning the lease are resolved.”

The response of the Defendant was dated the 13th March 1998, and stated:

“I am really surprised at your memory lapse about the meeting we had on February 26 in your office.

All five of us who attended that meeting concurred at that time that you had given consent for work to begin on March 2. Deputy Cecilia Keaveney independently confirmed this at a later date. …

On the basis of your word on February 26, work commenced and substantial finance was committed to the development.”

Thomas Tobin, Principal of Coastal Zone Division in the Department, replied that day. He sought to draw the Defendant’s attention to the Second Schedule of the lease which required plans and drawings to be submitted for Ministerial approval. In circumstances where no such plans had been received:

“[T]he prohibition in the Minister’s letter of 6 March, 1998 on any marina works proceeding, stands.”

Ultimately the Plaintiff claims that no consent could have been given at that time because there was in existence no schedule of works which could have been approved by the Minister. Two further letters in similar terms were exchanged between the parties on this topic.

11. In relation to the meeting of the 26th February 1998, the Plaintiff has noted that the Defendant originally claimed that it had secretly recorded the meeting, and prepared a transcript therefrom. However, such never materialised and it is thus alleged, that this may in fact have been posturing by the Defendant. At that meeting there was also a discussion about rent which subsequently became the source of heated debate between the parties. In its Replies to Particulars, dated the 21st June 2006, the Defendant stated that the Minister:

“would offer a variation in the terms of the back rent. Specifically the Minister told Ms. Heaney to write a letter setting out in strong terms the background to the development of the project, how they were innovators or pioneers in the area, what happened in relation to the payments and details of her husband’s health problems. The Minister said that he would not be optimistic about a total waiver and said that there had to be a consistent formula. He said he would go to the Department, that he appreciated the urgency and that he would try to get it sorted out.”

This, the Plaintiff contends, is consistent with the minute that was prepared by it at the time of the meeting. It is indicative of the Minister trying to look into the matter, but not as later implied that he was in fact waiving back rent.

The Prohibitory Notices:-

12. Following the correspondence between the Defendant and the Minister throughout February and March 1998, on the 8th April 1998 the Plaintiff served a Prohibitory Notice under the Foreshore Acts 1933 and 1992 on the Defendant. The Notice stated, inter alia, that:

“WHEREAS the Minister for the Marine is of the opinion that the removal of beach material from, and disturbance of beach material in, the area of the foreshore contiguous to the townland of Fahan, Lough Swilly, Co Donegal should be restricted and controlled.

AND WHEREAS the said area of foreshore belongs to the State.

NOW, THEREFORE, the Minister for the Marine in exercise of the powers vested in him by Section 7 of the Foreshore Act, 1933 as amended by Section 4 of the Foreshore (Amendment) Act, 1992 hereby prohibits you from removing beach material of any kind from the said area of foreshore and from disturbing the beach material of the said foreshore by entering upon the said foreshore with any vehicle or mechanical or manual excavator.”

13. Another such Notice was served on the 17th April 1998. It too raised concerns in relation to the removal of beach material from the site. A meeting was had between the Defendant and representatives of the Minister wherein the former agreed to stop the works. However this was not done immediately. Ultimately the Defendant did give an undertaking in writing on the 6th May 1998 not to continue works. The letter, signed by Catherine Heaney, Michael McDaid and John McDaid, stated:

“The undersigned directors of Figary Watersports Development Co. Ltd., confirm that work on the construction of the marina stopped on April 29, 1998 and shall not recommence pending:-

1. The determination by the Minister for the Marine and Natural Resources of what remedial works (if any) are required to ensure the structural stability and general safety of the breakwaters and any other structures already in place;

and

2. The submission to and acceptance by the Minister of agreed plans for phase one of the marina development as per second schedule to the lease.

We also undertake to comply with the terms of the Prohibitory Notices issued in relation to the site pending resolution of the matters referred to at 1 and 2 above.”

The McDaids essentially own the Defendant.

14. Nonetheless, the Plaintiff took issue with this undertaking, noting in a reply dated the 8th May 1998 that:

“[T]he terms of the undertaking received vary significantly from the draft undertaking … in that the specific assurances required … have not been provided and the wording of Paragraph 2 has been amended by the replacement of the words ‘for the full’ (marina development) by the words ‘for phase one’”

The Department was thus not in a position to accept any omission or alteration of terms, as were provided for in its draft undertaking sent on the 1st May 1998. Accession to this demand followed on the 11th May 1998.

15. The works on site were inspected on the 7th and 8th May 1998 by Ian MacKenzie, Consulting Engineer, at the invitation of the Defendant. His views are recorded in a letter of the 14th May 1998. In particular he noted that in order to ensure the structural stability of the marina, and to ensure that it would not silt up, further investigations were required, and, to wit, boreholes and surveys would be necessary. He continued:

“I would note that the present situation presents a submerged hazard to shipping, even though it is only relatively small boats which can proceed up as far as the marina. Action is required to make any visitors aware of the situation.”

He thus recommended that “the northern breakwater is extended to its present out limits to a level of 5.0m above chart datum and hazard warnings located at the outer limits of both north and south walls.”

16. The Defendant, in a letter dated the 25th May 1998, particularly sought consideration, as against rental respite, for the fact that works had to cease, and for the costs of both the inspections conducted by Mr. MacKenzie and the carrying out of works suggested by him. However, replying to this request, the Plaintiff noted that the works suggested by Mr. MacKenzie should have been undertaken prior to the erection of the breakwaters, and consequently would have to have been carried out by the Defendant in any event. In both letters the issue of “completion” of the lease arose; however, the Plaintiff was adamant that the Minister would not be in a position to consider such completion unless he could be satisfied as to the stability and safety of the existing structures.

17. Following this letter further correspondence was exchanged between the parties in relation to safety warnings in and around the marina, the technical specification of the breakwaters and the “completion” of the lease. However, it is unnecessary to go into these in any detail.

18. On the 26th May 1998, the Royal National Lifeboat Association wrote to the Minister asserting that the submerged section of the sea wall being developed at the site represented a serious hazard to water users unfamiliar with the area. In this regard they concurred with Mr. MacKenzie that the breakwaters should be raised to a level 5 metres above chart datum. The Plaintiff replied, on the 9th June 1998, that, for reasons already conveyed to the Defendant, it could not agree to a proposal to raise the height of the breakwater; instead interim navigational markers could be used.

The Bond:-

19. A substantial matter which also arose between 1998 and 2000 was the Plaintiff’s insistence on the Defendant obtaining a bond; that is to say that an insurance company would be in place to indemnify the Minister should the quality of works be substandard. The bond was to be for an amount of IRŁ250,000. Note the lease covenant in this regard was for a “restorative” Bond. This was referred to in numerous correspondence between the parties over this time. On the 29th January 1999, Aon MacDonagh Boland (“Aon”), insurance brokers and consultants, wrote to the Plaintiff stating:

“This long drawn out saga appears to be coming to a conclusion. DeMontfort [sic.] Insurance Company are at the moment checking out security which have been offered by Figary Watersports before they issue the required Bond.”

Attached to this letter was a copy of the proposed Bond which De Montfort would issue. The views of the Department thereon were requested.

20. The Plaintiff’s response was to write to Michael Galbraith on the 2nd March 1999. Having noted a meeting of the 11th February 1999, and also its request to the Chief State Solicitor’s Office (“CSSO”) to examine the wording of the proposed Bond, the Plaintiff continued:

“The CSSO have since advised that in order to determine whether the Bond wording is acceptable they require sight of the contract for the construction of the marina. Accordingly I would be grateful if you would arrange with you clients to furnish a copy of the aforesaid contract so that the matter can be resolved as soon as possible.”

Michael Galbraith, the Defendant’s Architect and Surveyor, retained by Figary, replied, on the 23rd March 1999, stating that since the Defendant was both developer and contractor there was no building contract. Instead his client’s letter confirming that the building would be constructed in accordance with the lease, dated the 22nd March 1999, was attached.

21. Michael Galbraith sent a further letter to Declan O’Rourke, Assistant Principal Officer with Coastal Zone Division in the Department, dated the 16th April 1999, referring to his of the 23rd March and subsequent telephone conversations, wherein he noted that:

“We must further advise you that we are not experts on the formation of wording for an insurance bond, and we consider that as it is a Department of the Marine stipulation that a bond is required the onus must be on the Department to determine an acceptable wording.”

No reply would seem to have issued in respect of this letter.

22. Following the alleged agreement in May 2000 (para. 36 infra), issues in relation to the provision of a performance bond, as opposed to a bond to ensure restoration of the foreshore, existed between the parties. In particular it would appear that the provisional wording for the bond as suggested by either side was not acceptable; in particular the Department would appear to have sought a bond which was payable on demand without recourse to arbitration. In February 2002 Declan O’Rourke, wrote to Michael Galbraith, raising issues with regards to the marina in general, but in particular with regards to the performance bond; he stated:

“Performance Bond: as you will recall it was agreed that the difficulty which you say De Montfort Insurance had with the wording of the bond might best be resolved if they communicated directly with the Chief State Solicitor’s Office. …”

23. The issue of a new performance bond continued and was again raised in September 2002. The Defendant wrote to the Plaintiff on the 16th September 2002 stating:

“We are currently in the process of arranging a new Performance Bond and wish to avoid the difficulties associated with the acquisition of the last one.

As you stated in previous correspondence, this project has had a somewhat troubled history associated with it; however, with the resignation of the former directors work at the marina has moved forward unimpeded and Phase I has been completed to the highest possible standard. There is currently floatation in place for 110 boats. On any given day there are between 70 and 100 boats moored at the marina and public support has been overwhelming. In these changed circumstances we would appreciate it if you would forward wording acceptable to the Department that takes account of the current situation and which reflects the high standard of work already carried out. Hopefully this will prevent any unnecessary delays in acquiring the new Bond.”

The Plaintiff replied to Michael Galbraith on the 20th September 2002 noting, inter alia, that:

“The provision of the performance bond, as required under the terms of the Lease also needs to be addressed as a matter of urgency. I have suggested to the company (see attached) that its insurance advisors might consider setting out precisely what difficulties the wording as drafted by the Chief State Solicitor’s Office presents with a view to direct liaison with that office on a possible compromise wording.”

Attached to that letter was one sent directly to the Defendant which set out similar provisions in relation to the performance bond.

24. For the sake of clarity it should be noted that two different types of bonds are at issue in this case:

pre

-May 2000, a bond to ensure restoration of the foreshore under Clause 12 of the 1993 lease;

ii) post-May 2000, a performance bond for the completion of the marina pursuant to the alleged agreement of the 19th May 2000.

25. The Defendant in summary contends that it provided Bonds to the Plaintiff on a number of occasions, but such were not accepted. In particular:

i) A remedial bond was obtained from the De Montfort Insurance Company on the 27th November 1999, but the Plaintiff refused to accept it without a schedule of works;

ii) A schedule of works and a bond were submitted in May 2000, but there was no response in relation to the same until March 2001, when new requirements in relation thereto were added by the Plaintiff, in particular that the bond be “on demand” and not subject to arbitration;

iii) Once these requirements were dropped, the Defendant again attempted to submit a bond, but the Plaintiff made acceptance of such, conditional on a schedule of works; the matter therefore continued to be outstanding.

The Forfeiture Notice:-

26. Going back in time slightly, shortly following the issuing of the Prohibitory Notices (paras. 12 and 13 supra.), the Plaintiff served a Forfeiture Notice, dated the 12th June 1998, under s. 14 of the Conveyancing Act 1881 on the Defendant. In the covering letter, dated the 16th June 1998, the Plaintiff stated:

“It has come to the attention of the Minister for the Marine and Natural Resources that despite previous undertakings to the contrary and in direct breach of the Prohibitory notices which were served in April 1998, your company has recommenced work on the construction of the marina… As outlined in this Department’s letter of 3 June, the Minister has decided that he has no option but to initiate legal action and has accordingly approved the service of a Notice of Forfeiture on your company in respect of the lease dated 26 April, 1993.”

27. The Notice itself draws attention to Clause 1 (the rent payment obligation), and Clauses 3 – 18 of the lease (para. 6 supra.). It notes that:

“It was an express provision contained in the said Lease that if the rent or reviewed rent thereby reserved or any part thereof or any additional rent which might be imposed pursuant to the covenants therein contained or any part thereof should be unpaid for 21 days after the same should become due (whether demanded or not) or in the event of any breach or non-performance of any of the covenants or conditions therein contained on the part of the lessee to be observed and performed then in any such case the term thereby granted should cease and determine and thereupon the lessor might re-enter into and upon the demised premises or any part thereof in the same of the whole and repossess same without prejudice to any remedy of the lessor under any covenant by the lessee therein contained.”

28. The Forfeiture Notices contended that the Defendant was in breach of numerous covenants by virtue, inter alia, of:

i) the non-payment of rent (IRŁ72,000 at that time);

ii) the failure to construct the marina in accordance with the Second Schedule and in accordance with planning permission;

iii) the failure to obtain prior consent for excavation, removal or stockpiling of beach material, and breach of, additionally, the Prohibition Notice;

iv) the construction of the breakwater in an unstable and dangerous way;

v) the failure to pay all stamp duties exigible (now done by the Defendant);

vi) the excavation by the Defendant of beach material otherwise than where it is necessary, disturbing, removing and interfering with beach materials;

vii) the failure to procure the bond of IRŁ250,000, despite repeated requests;

viii) carrying on works and development without first seeking or obtaining a Grant of Planning Permission;

ix) failing to carry out works in accordance with planning permission (Record no. PL 5/5/80113, P.A. reg. ref. T.883/88) which was granted by An Bord Pleanála on or about the 8th February 1990 and which has withered and ceased to be of any effect or force in law; and,

x) failing to keep the premises in a good and proper state of repair and in proper condition and free from all defects injurious to navigation or the adjacent land or the public interest.

On foot of these asserted breaches the Notice stated that “the Minister for the Marine and Natural Resources intends to rely upon the said proviso for re-entry” and called upon the Defendant to remedy these breaches and to pay compensation to the Minister, otherwise he “will exercise his right of re-entry which has arisen and will forfeit the Lease and the said lessor shall enter upon the demised premises and thereby determine the aforesaid Lease.”

29. In July 1998, Irish Geotechnical Services Ltd. (“IGS”) carried out a site investigation, comprising seven boreholes put down from the existing foundation level of the breakwater. Its findings were communicated to the Defendant, which had retained it, in a letter dated the 24th July 1998. It was of the opinion that “the settlement of the finished structure is not a concern” and “[t]he stability of the rock fill breakwater … is expected to be very good”.

30. Matters after this seemed to have stalled, with little progress of consequence occurred until 2000. There was correspondence in that year wherein the parties debated whether planning permission was ever necessary for areas of the foreshore. The Minister accepted that such permission was not required for development below the high watermark, but nevertheless noted that there was a contractual obligation on the part of the Defendant to be planning permission compliant in relation to the developments on the site, or adjacent site; the fact that planning permission is not required for areas of the foreshore did not mean that there were no obligations in relation to the other portions of land they occupied. Further, significant correspondence was exchanged between the parties in relation to the engagement of specialist marine consultants and the necessity to provide to the Plaintiff appropriate designs and structural drawings for its approval. The Plaintiff at all times denied an assertion that previously it had accepted any such plans, or consented to any works on foot thereof.

31. Notwithstanding these matters, a meeting took place in May 2000 with the then Minister for the Marine, Mr. Fahey T.D.; this following his letter of the 2nd March 2000 which, whilst noting that the planning permission had lapsed and that works had not been completed, sought to put in place an appropriate set of arrangements that would meet the impasse between the parties. He referred to an earlier aide-mémoire dated the 3rd of February 2000 by Thomas Tobin which sets out the Minister’s formal position regarding facilitating the completion of the marina. Three requirements were set out therein:

“1. Detailed designs for all further proposed works / structures for completion of Marina (in ancillary facilities) as per the 1993 Foreshore Lease to be submitted by the promoter for approval by the DoMNR. … DoMNR will consider the detailed designs as a matter of urgency when received.

2. Performance Bond (Ł250,000) requires to be approved by DoMNR and to be precisely related to the satisfactory completion of works / structures in accordance with detailed designs approved by DoMNR.

3. Promoters to provide written confirmation from Donegal Co Council that Planning Permission is not required for any works / structures below the High Water Mark (HWM) (it being understood that the promoters will seek Planning Permission for works / structures above HWM as soon as possible).”

32. In March 2000, Michael Galbraith replied to the Plaintiff, informing it that Arup Consulting Engineers (“Arup”) had been appointed as marine engineers to the project. Attached to the letter was a report of Arup dated the 15th March 2000, which outlined their recommendations for completion of the marina, and which was tendered to satisfy item 1 of the aide-mémoire. The letter also stated that the Defendant had been advised that items 2 and 3 had also been dealt with to the Plaintiff’s satisfaction. The report of Arup, referred to in the letter, contained the following findings:

“- the overall marina engineering design appears to be generally well conceived and reasonable

- the rockfill breakwaters which form the marina were constructed in basic form

- the rock armouring to the breakwaters has been completed on the outside flank of the south-east and north-west breakwaters and appears to be of reasonable quality

The rock armouring to the outside of the south-west breakwater (the most exposed) has still to be done, as the armouring to the inside face of all the breakwaters.

Due to the incompleteness of the armouring, some erosion of the rock fill core material has occurred on each of the breakwaters – particularly on the outside face of the south west breakwater.

- the work which remains to be carried out includes:

- completion of the breakwaters – i.e. final shaping and armouring

- finalisation of the entrance channel through the south-west breakwater

- excavation/dredging of the marina basin, and use of the excavated/dredged material to fill the area between the rear embankment of the marina and the shoreline

- installation of the floating walkway system

- construction of the shore facilities building

- installation of drainage and services”

The report also made recommendations for the completion of works, including, inter alia, that the marina entrance be relocated to the southern corner.

33. The Plaintiff acknowledged receipt of the above correspondence and report by letter dated the 23rd March 2000, and by letter dated the 11th April 2000 noted that its engineering division had requested that “Arup provide sufficiently detailed drawings, Plans, Cross Sections etc.”.

34. In mid-2000 drawings were sent by the Defendant to the Minister for approval, but final approval, he said, would not be furnished until the outstanding matters identified were addressed. The Plaintiff notes that at this point what it was seeking was confirmation from Arup with regards to quantities of material for works to be carried out on the marina. This was not ultimately done until August 2005.

35. On the 12th May 2000, Arup gave further details of various items of works to be carried out at the marina, in particular:

i) Rock fill breakwaters;

ii) The excavation and dredging of the marina basin;

iii) The installation of a proprietary floating walkway system;

iv) The construction of the marina shore buildings and access roads in accordance with specific drawings;

v) The construction of services to the shore facility;

vi) The construction of a slipway and boat lift.

An approximate time frame of six months was given for the completion of these works.

36. On the 19th May 2000, Declan O’Rourke, wrote to Michael Galbraith, indicating that:

“I am hereby to authorise the commencement of works on the site forthwith subject to your immediate and written confirmation on behalf of FWD [Figary] of their acceptance of the following conditions:

(a) the acceptance and clearance of the design and specification of the marina and a schedule of works which are to be agreed between the Department and the engineering consultant to the project, Ove Arup Engineering consultants within the next seven days;

(b) the provision of a performance bond of suitable duration and which specifies the cover of all of the works set out in the schedule of works to be agreed;

(c) the provision within seven days of confirmation by the engineering consultants to the project that all of the works set out in the schedule shall be carried out under their direction and supervision and in accordance with the design and specifications to be agreed;

(d) that in the event of an agreement not being reached between Ove Arup Engineering Consultants and the Department within seven days all works on the site shall be suspended and will not recommence until such agreement is reached.

Subject to the receipt of the above written confirmation the Department will affirm in writing that the Lease is active.”

Michael Galbraith immediately replied to this letter stating that they:

“confirm on behalf of our clients, Figary Watersports Development Co ltd, their acceptance of condition’s [sic.] (a), (b), (c) and (d) contained in your letter. As stated in your letter, please confirm to us by return your authorisation for commencement of work on site forthwith and affirm that the lease is active. …”

Declan O’Rouke, having noted the Defendant’s acceptance of the conditions, replied, also on the 19th May 2000, stating:

“On foot of this undertaking, your clients are hereby authorised to commence works on site forthwith. As indicated in the concluding paragraph of my letter, the Department confirms that the Lease is active. …”

It should be noted that the Plaintiff considers that subsequently the Defendant has failed to meet requirements (a) – (d) contained in the letter of the 19th May 2000. In those circumstances the Notice of Forfeiture was not waived, the requirements being conditions precedent to such. The Defendant, however, considers that the letter of the 19th May 2000 amounts to a variation of the terms of the lease and forms the basis of a new agreement between the parties, which required certain matters to be dealt with subsequently. Implicit in such agreement was that the Plaintiff would facilitate the efforts of the Defendant, and not hinder it with unreasonable demands or refusal of consents.

37. Drawings were received in 2000, and in mid-2000 it was envisaged by the Defendant that there would be storage of some surplus dredge material or spoil in the lease area at the north west of the marina basin; however the drawings furnished showed no in-fill area at this point, as the Defendant envisaged only reclaiming the area between the basin and the shore.

The Disposal of Dredged Material and Later matters:-

38. Between 2001 and 2002 the main agitation between the parties in correspondence was how dredged sand, which the Plaintiff alleges was effectively dumped on the foreshore, was to be treated. A letter from Arup dated the 28th February 2002, indicated, inter alia, that:

“Additional rock armoured embankment will be required to retain the fill along its north-west/north boundary.”

The idea of storing dredge spoil and retaining an embankment in this area had first emanated from the Defendant in 2001 and 2002 and the drawing furnished at this stage indicated a retaining wall. However this was too far north of the site and this matter, like many others, was never ultimately resolved between the parties.

39. In September 2002 the marina opened and become operational. It was at that stage still only partially complete. Planning permission for a new access road was refused by Donegal County Council.

40. The Plaintiff has indicated that it was never understood or agreed that a partially completed marina would be tolerated. There were ongoing difficulties because of the failure to provide onshore facilities, such as toilets, showers and sewage pump facilities, for the healthy disposal of sewage etc. These are regarded by the Minister as having been, and still being, breaches of Clauses 22 and 24 of the lease.

41. In this period and into 2003 the Plaintiff continued to have concerns about the operation of the marina because:

i) No rent had been paid or proffered;

ii) The schedule of works was still outstanding, which was an essential prerequisite for the provision of a performance bond;

iii) Consequently there was no performance bond in place;

iv) There was no planning permission in place for works above the high watermark, planning having stalled because of an issue concerning the suitability of the junction of the access road onto the site;

v) A substantial amount of unauthorised excavation of dredge soil had taken place on site, and the Defendant had no permission for its proper removal off-site, in breach of Clause 10 of the lease;

vi) The way the marina was being operated gave rise to concern, in particular because of the pumping of dredge material directly from the marina basin onto the foreshore beside the lease area.

42. It would seem that the parties at this time were individually unclear as to whose responsibility it was to find a proper site for the disposal of dredge material. There was intermittent trucking of beach material from the site to unknown destinations organised by the Defendant. The Plaintiff claimed that excavated beach material is waste under s. 4 of the Waste Management Act 1996, and therefore can only be transferred to an appropriate facility which has a waste permit, and can only be transported by a waste collection permit holder.

43. The quantity of material involved was approximately 96,000m3 which the Defendant insisted it could not move without authorisation from the Plaintiff. The Plaintiff stated in Court that it was entirely for the Defendant to find an appropriate recipient for this and to organise itself in a way which was compliant with the waste management legislation. In December 2002 there was further correspondence between the parties in relation to this issue. On the 12th December 2002 Nancy Doherty, on behalf of the Defendant, wrote to Joe Ryan, the then Principal of the Department, Coastal Zone Division, stating, inter alia:

“[W]e respond to the issues raised in your letter [of the 4th December 2002] as follows:

… As stated in our correspondence of the 5th of December and verbally to John McHale on that same day, we propose to store the dredge spoil at Michael McDaid’s quarry, which is nearby and easily accessible. Perhaps you would be good enough to specify the terms and conditions under which such excavation, removal and stockpiling will be permissible. We have met with Donegal County Council’s Area Manager for Roads and Transportation, Patrick J. Gillespie, and enclose a copy of his correspondence confirming they have no objection to our proposal. …

Finally, as inferred in our correspondence of the 5th of December, we likewise have very serious concerns about the level of cooperation and assistance we received from the Department and hope that the New Year heralds a new beginning in this regard.”

The Plaintiff replied on the 20th December 2002:

“[T]he Department has been exploring possibilities for the use/disposal of the further material to be dredged from the marina. You will appreciate, of course, that this is by way of assistance to the Company, and that it is primarily a matter for the Company to identify a means of dealing with this material that is acceptable to the Department and other relevant public authorities.

You will be aware also that one of the possibilities identified is the placing of the material on the North Western Golf Course. It is our understanding that this would need the approval of Donegal County Council under waste management legislation: we would suggest that the Company pursue the matter directly with the local authority.

I must take issue with the suggestion in you letter of 12 December that the Company has concerns about the level of cooperation and assistance it receives from the Department. As we made clear at the meeting on 22 November, the Department’s objective is to secure the orderly completion of the development in accordance with the terms and conditions of the Lease. You may be assured that the Department will, for its part, continue to pursue this objective in a positive and proactive way.”

44. Following a brief response from the Defendant, the Plaintiff wrote again on the 10th January 2003 and noted that:

“[F]ar from seeking to impede the completion of work on the marina, this Department has sought to identify a feasible, expeditious and cost effective solution to the disposal of the surplus material to be excavated from the marina basin.”

The Department raises again the possibility of using the sand on the links golf course, and states that it feels that this would be a preferable option to stockpiling the material in McDaid’s quarry, since the sand would have to be washed to remove salt content to avoid contamination of the water table. It further reiterates that, in any event, materials should not be removed without the consent of the Plaintiff. A Schedule of Works, as requested in their earlier letter of the 4th December 2002 was also required.

45. The Defendant replied on the 14th January 2003. It said that it would not be in a position to provide a revised Schedule of Works until the issue of “surplus beach material” has been dealt with. In particular it stated:

“For your further information we have been attempting to meet with representatives of the golf course in Lisfannon but have not had any success to date. We are making further attempts today, however, if the golf course is not prepared to enter into any, or any adequate financial arrangements with the Company, then we are not, understandably, going to absorb the costs of excavating and transporting the material for free.

In any event, we would be grateful if you would comment on the position with regard to the proposed dredged material at Rathmullan and Buncrana as outlined in our earlier correspondence of the 6th January. In the Donegal County Council newsletter appended to both Environment Impact Statements the council states

‘Further to discussions with the Environmental Protection Agency, a waste licence for the use of dredged material will not be required due to the inert nature of the sediments…’ Therefore, perhaps you could explain why one would be required in our case.

We also understand that dredged material from Lisahally in Derry is transported around Donegal for various purposes. We would therefore be grateful if you would confirm by return the requirements and governing regulations in relation to this material or refer us to the appropriate Department or Agency to whom we can direct our queries.”

The Defendant was thus at a loss at to why a waste licence was required in its case. A similar letter, in particular in relation to the dredged material, was sent by the Defendant to the Department on the 18th February 2003. It refers to an EIS study commissioned by Donegal County Council and prepared by Kirk McClure Morton entitled “Rathmullan Boat Harbour Environmental Impact Statement (September 2000)” which stated in relation to such material that:

“Each of three samples taken at Rathmullan has very low levels of contaminants with low levels of heavy metals (cadmium, lead, mercury, arsenic etc.), and non detectable levels of PCBs, pesticides and Organotin compounds. These results indicated that the dredge spoil from this area can be safely disposed of either on land or at sea.”

The letter continued to note that the “Buncrana Boat Harbour Environmental Impact Statement (September 2000)” stated the same, with the added conclusion that “there will be no impact on the quality of groundwater resources in the local area.” Both studies indicated that a Waste Licence would not be required with regards to such dredged material. Furthermore, the Defendant noted, that the Council in the newsletter referred to had stated:

“Further to discussions with the Environmental Protection Agency, a waste licence for the use of the dredged material will not be required due to the inert nature of the sediments…”

The Defendant thus sought clarification as to why a Waste Licence would be required in its case, and complained that in the circumstances “the requirement for a licence is onerous”.

46. Shortly afterwards, letters were also sent by the Defendant in relation to a proposed buy-out of the lease; the Defendant noting the value placed on the leases by the Plaintiff was excessive, especially given that no one from the Valuation Office had even attended at the site.

47. The Defendant wrote again concerning the performance bond on the 26th February 2003, indicating its wish to put such in place; it also referred to the preparation of a Schedule of Works however:

“[A]s the Department has decided not to accept our proposed location, and no other acceptable location has been found for the excavated material, it is difficult to finalise a timetable.”

Nonetheless it did state that dredging could be completed within 12 months of the provision of a bond, and the breakwaters within a further six months, with further pontoons also added during this period. However it was essential to dredge prior to those actions. The Defendant thus noted that before it could move forward it needed a definitive location for the excavated material and also it needed clarification of the Department’s requirements “as discussed at the meeting of the 11th February [2003]”. In this regard it said:

“As it presently stands we don’t even know the value of the bond you are looking for or what specifically you want it to cover. Understandably if we do not know the Department’s position it is hard to comply with it.”

As can be seen, several matters became interlinked, with multiple cross-referencing by either side.

48. Following this, the Plaintiff replied by fax dated the 6th March 2003, attaching a note of a meeting between the Chief State Solicitors Office and John Barton of Aon, and an e-mail from John Barton confirming the note’s contents. The e-mail recorded that:

“I think your notes are a fair reflection of our meeting. However, I would add that Figarry [sic.] will be required to demonstrate they have the technical and financial capacity to complete the schedule of works within the required period before any underwriter will offer a bond. I am satisfied that we can produce a text for a bond that all parties will accept. However, we can not take the proposal to underwriters until a schedule of work is agreed between the company and the Dept.”

It is unnecessary to set out in any length the contents of the note, but a couple of sentences should be outlined. In particular, under the heading “Department’s Position”, it was stated that:

“Based on the existing level of investment in the project by the company, the Department did not consider that premature abandonment was probable or likely. In the circumstances the Department was willing to give sympathetic consideration to the underwriters [sic.] request.”

It further stated:

“While it was considered that due to the passage of time and the consequent increase of construction costs, it was unlikely that the Bond would cover more than a fraction of the remaining costs, the Department was not proposing to seek an increase in the value of the Bond.”

49. With regard to sand disposal, the Defendant continued its attempts to find purchasers or uses for this material; it informed the Department on the 1st April 2003 that:

“This is to advice you that samples of sand excavated from the marina basin have been distributed to ready-mix plants in N. Ireland and the sand is suitable for manufacture of concrete products. Contractors who have tested the sand have an interest in purchasing it for concrete products and road surfacing material. Therefore, the sand is a benefit to industry not a waste material.

Also, McDaid Quarries have submitted a planning application for production of concrete products in Burnfoot and already have a plant with full approval in N. Ireland.

As it is now our intention to export this material we feel that an EPA study or waste disposal licence is no longer required, as is the case with the sand moved from Lisahally by the Port and Harbour Commissioner and in line the EIS carried out by Donegal County Council for their proposed marinas at Rathmullan and Buncrana.”

The Department replied on the 23rd April 2003; it requested contact details of the plants interested in purchasing the sand, with correspondence confirming such interest, the trade name and address of the McDaid Quarries plant in Northern Ireland, with planning consent for the placing of the sand issued by the relevant statutory body, and the estimated timescale for production to commence at Burnfoot if planning is granted. The Department also wished to know whether silt would be removed on-site or off-site, since:

“The Department understands that operations to clean and grade dredge material on site would require planning permission from Donegal County Council.”

It again reiterates that no material should be removed from the lease area without its consent.

50. A further, and lengthy, letter was sent by the Plaintiff to the Defendant on the 27th May 2003. This set out in detail the Department’s position as it then was, inter alia, in relation to: rent arrears; the buy-out of the lease; completion of works; disposal of dredge; the performance bond; and, marking of the foreshore outside the leased area. The Department on the rent issue was clear that it “was not possible to write off monies that are properly owed and due”, and that the valuation of the site, for a buy-out, given by the Valuation Office was as already indicated. In relation to the schedule of works the Department did not accept that such could not be finalised until the question of the disposal of the dredge soil was dealt with; a schedule with dates contingent would be acceptable. With regards to the dredge soil, the Department reiterated that the finding of a suitable site for disposal and the obtaining of the necessary permits or licences for its transport were, and were always, a matter for the Defendant. In relation to the sites mentioned at Buncrana and Rathmullen, and as to why a disposal licence would be needed, the letter states:

“The Department’s understanding is that a permit from the local authority, rather than a licence from the Environmental Protection Agency, is required in respect of the disposal of material of this nature. However, this is a matter for your Company to pursue with Donegal County Council in the first instance: relevant contact details were given in out letter of 10 January 2003.”

The Department also notes that deposition of the dredge material either outside the lease area “per se”, or outside the area in substantial quantities, is illegal and must be ceased immediately. With regards to the performance bond the Department merely notes that such is dependant upon a detailed and costed schedule of works being provided, which highlights the urgency for a proper schedule. The Defendant’s holding reply on the 9th June 2003, only noted that no sand was being pumped outside of the lease area, and to imply that any activity in relation thereto was a recent or ongoing activity or some kind of illegal operation was wrong, and did not represent understandings reached with Department officials in the past.

51. A more comprehensive reply to the Department’s letter of the 27th May 2003 was sent on the 18th June 2003. The Defendant stated in trenchant terms:

“It is with disbelief that we read your letter of the 27th May 2003 requesting responses and imposing deadlines in relation to issues which we have written to your Department about repeatedly over the past year and which you Department has persistently failed to answer. In fact it was this very lack of response that left us with no option but to bring our concerns to the attention of the Ombudsman. … Further, it would give the impression to an objective outsider that it’s our Company, rather than the Department, which is hindering this project.”

The Defendant went on to deal with each of the issues identified above in the letter. In relation to rent it noted that this was the first time the Department had stated that it was “not possible to write off monies that are properly owed”, and in those circumstances it asked why had the Department been engaged in correspondence in this regard from as far back as February 1998. The Defendant took strong issue with the Department’s comments in relation to the dredge soil. In particular it said that:

“Firstly, we disagree with your definition of the excavated material as spoil, because it is a financial benefit to our company and the construction industry at large.

Our understanding … was that the Department would have an input into any proposed location for the breach material. Further, the fact that the Department refused our request in July 2001 to remove the material further reinforced this view. It’s unfortunate that it has taken nearly two years for the Department to clarify the position unequivocally. Had the Department made this clear in July 2001 we would not have been labouring under an illusion for over the past two years. It should also be noted that when we were first advised verbally that we should identify a location we did so, immediately naming Michael McDaid’s quarry. This location was satisfactory to the Department’s engineers at the time, but as soon as we provided the local council’s authority to transport the material the Department objected.”

The Defendant noted that in this regard no suggestions had been forthcoming except for the golf course, but as had been previously advised, the golf course would take the material, but did not “want to pay even the minimal transport costs.” In relation to the performance bond, Figary said that:

“[A]fter five years [we were pleased] to get to a position where the government would agree to terms and conditions acceptable in normal commercial bonds, having dropped their long-standing insistence that the bond must be payable on demand and without recourse to arbitration, a condition no underwriter in the country was willing to agree to.”

Nonetheless, despite this, the Defendant felt that a bond at this stage of the development was unwarranted; substantial works having already been completed. Furthermore, since the bond sought was for IRŁ250,000:

“As we have spent 3.5 million euro to date with approximately another 3.5 million euro to spend, the request for a bond appears irrational.”

But in any event the bond could not be dealt with until the issue with regards to the dredged material was resolved. The Defendant lastly notes generally that:

“[I]n line with the governments [sic.] inability to grant fund our marina development, the Department further intends to ensure that we get no other assistance from government in those areas over which they do exercise discretionary powers and which would offer us some relief in the short and medium term.”

It therefore saw no useful purpose in further meetings with the Coastal Zone Management Division of the Department. The Department replied on the 9th July 2003, but nothing arises therefrom.

52. On the 25th September 2003, the Defendant wrote to the Department with the names of, and letters from, companies interested in purchasing the sand. These included:

i) Brickkiln Civil Engineering Contractors Limited;

ii) B Mullan & Sons Contractors;

iii) J. J. McDaid (Haulage) Ltd;

iv) J. Barr & Sons Manufacturing Ltd;

v) City Concrete Limited; and

vi) J & J Transport Limited.

The Defendant also enclosed laboratory-grading test results of beach material sampled on the 24th September 2003 at the Materials Test Centre in Letterkenny, which showed that “the silt content is virtually zero”, and stated that grading and processing would take place, in any event, at the various contractors’ premises. It also indicated that it was in the process of updating a schedule of works, but the dates contained therein would have to be conditional on permission to remove the sand from site, and, until this was done, no bond could be put in place.

53. I would just note that the letters of interest last referred to were opened before the Court, as were the test results mentioned. It would seem to be accepted by both parties at this stage that the sand was of high quality with low impurity.

54. Little correspondence of note passed between the parties from September 2003 until early 2004. On the 18th March 2004, the Defendant wrote to the Department stating:

“On Monday last we telephoned your office enquiring as to why the Department had failed to respond to us with regard to approval for our proposed location for the beach material excavated from the marina basin. It became apparent during the conversation that the Coastal Zone Administration Division was not sure which came first, authorisation for removal of the material or permits under the waste disposal legislation. Specifically, you implied that the Environmental Protection Agency or local council might play a larger and more determinative role. It was disappointing to hear this at this stage because our latest proposal for the beach material was sent to you nearly six months ago and the Department has not contacted us since.”

Confirming that the Defendant had provided such information as requested, the letter continued:

“On Monday, however, you stated that you had not received proof that the proposed concrete manufacturers had a waste collection permit and you believed the EPA might have to be involved. This remark was totally unexpected since no company (let alone six of them) are going to go to the time and expense of obtaining a waste collection permit while we do not even have the authority to remove the material. This is, we might add, the first time such a proposal has been floated by the Department.

Please be assured that once the Department makes a determination that the beach material may be removed from the marina for the manufacture of concrete products, then we will ensure that anyone collecting the material has the appropriate permit.”

The Defendant explained that because it had received conflicting information from the Department and local council, it contacted the EPA who advised that no waste licence was required. On two separate occasions the council advised that a waste disposal permit was required to remove the material: on the 25th August 2003 the Defendant wrote to the Waste Management Department of the Council stating that it wished to remove 96,000 m3 of excavated beach material to be used in the construction industry and requested the council to confirm their position. In response the council forwarded an application form with just a compliment slip. The Defendant then noted:

“When we were completing the form it was apparent that it did not pertain to our request so we phoned the council again and this time Dearn McClintock said we didn’t need a waste disposal permit after all, rather it was the Department’s responsibility to authorise the removal, and thereafter any material collected from the site required the operator to be in possession of a waste collection permit.”

The Defendants were thus of the opinion that, having forwarded letters from both the council and the EPA in relation to this issue, all that was needed to conclude it was authorisation to remove the excavated material and for the Department to sign off on the schedule of works provided on the 31st October 2003.

55. Further letters were sent to the Department following this indicating the urgency with which these matters needed to be resolved. On the 2nd December 2004, the Department wrote to the Defendant with a list of outstanding works. In relation to the dredge material, the Department’s position was that:

“[I]t will not object to any proposals for the disposal or beneficial reuse of the material in question, provided that your Company establishes to the satisfaction of the Department that the said disposal or reuse will be conducted in full compliance with all statutory requirements. This would require the submission of copies of permits issued by the relevant authorities (in this jurisdiction or in Northern Ireland) to those engaged in the transportation and disposal or reuse, as the case may be, of the material in question.”

The next day the Department provided a draft schedule or works containing a list of outstanding works for completion in accordance with the agreed design, dated the 26th May 2004.

56. Going into 2005, the Plaintiff continued to express concern with the Defendant’s failure to pay rent, provide a schedule of works, provide a performance bond, and further was concerned with encroachment beyond the demised area and the disposal of dredge spoil in the location of the site.

57. Ultimately a schedule of works was received by the Plaintiff in 2005, but such was unsatisfactory because it had been prepared by the Defendant itself, and not by an independent consultant engineer; in non-compliance with the undertaking of the 19th May 2000 (para. 36 supra.). Furthermore the information supplied failed to quantify the cost of the remaining physical work on site, and the bond was not provided; the schedule of works being the sine qua non for its production.

58. In September 2005, Paul O’Sullivan of the Engineering section of the Department carried out a survey of the development and observed encroachment of some 4,030 m2 at the south west breakwater and 316 m2 at the south east breakwater. There was further encroachment into the foreshore and sand fill area to the north of the marina basin which involved 492 m2. The total encroachment, and thus area of trespass the Plaintiff contends, is 4,840 m2, or 0.48 hectares. Such is still ongoing.

59. The stalemate between the parties continued, with the instant proceedings issuing in October 2005. The present position is that it will be necessary to carry out substantial works on the site in order to provide safe and appropriate breakwaters and restore portions of the foreshore. It is estimated that the costs of completing the marina properly is somewhere in the region of €2.7 million including VAT, however that would not include construction supervision costs or any cost attached to the removal of sand off site. If the marina were to be wholly removed it is likely to cost €1.18 million including VAT, and again that does not allow for any cost associated with the disposal of rock off site, or the maintenance and storage of material off site. As of the 21st April 2006, the construction of the marina had cost the Defendant over €2.8 million. Since becoming operational in 2002, the marina has made the following profits:

• End of March 2003 – €308

• End of March 2004 – €1,204

• End of March 2005 – €1,793

The Interreg IIIA Application:-

60. Interreg is an EU funding programme designed to stimulate co-operation between member states by providing funding to projects particularly with a cross-border element. The Scheme in Ireland was set up under the Good Friday Agreement, and was the first time EU funding had been managed outside of Government. Interreg IIIA was the programme which ran from 2000 to 2006.

61. Once Interreg Programmes are approved by the European Commission, the implementation of the programmes is co-ordinated by Steering Committees, consisting of representatives of the authorities responsible for Cohesion Policy measures in each Member State. The Special EU Programmes Body (“the SEUPB”) was the Managing Authority for Interreg IIIA, and was required to work closely with government departments and the relevant local authorities and statutory bodies, as well as other sectoral and social partners. Article 34 of Council Regulation EC No. 1260/1999 of the 21st June 1999 lays down general provisions in relation to Structural Funds, and requires the Managing Authority to put in place adequate and appropriate procedures to ensure compliance both with the EU Regulations and relevant national requirements. During the course of the hearing evidence in relation to Interreg IIIA and its operation was given by Mr.McKinney, who was the Chief Executive of the SEUPB until May 2003.

62. Certain functions under Interreg IIIA were delegated to Implementing Agents in the Members States. In the case of Ireland, the Plaintiff in this action was the Implementing Agent for this purpose. The key roles of the Implementing Agent were, inter alia, to:

i) To ensure implementation of the Programme Strategy;

ii) Receive, process and assess applications;

iii) Manage project proposals, including providing support for project development;

iv) Monitor project progress and collect financial and performance data ensuring eligibility of expenditure; and,

v) Promote the Programme and Structural Funds in line with the Information and Communications Strategy set out in the Programme Complement.

63. The procedure under Interreg IIIA was that applications were submitted to the Implementing Agent, where they were assessed by the Assessment Panel, established by the Implementing Agent, which would then score the application and issue a recommendation as to funding. The application would then be sent to the Managing Authority whose Joint Technical Secretariat would look at the application to decide if it was in line with EU and national policies. The application would then be submitted to the independent Steering Committee for a decision. If the Steering Committee approved a grant an independent investment appraisal would take place. The investment appraisal will consider, inter alia, the people involved in the application, their ability to complete the project, their commitment, what they have done in the past, what they have delivered in relation to the project, and would have regard to the prospects of a project, knowing that a grant had been provisionally awarded. It will also ask if the applicant can afford the project, how much investment has been put in, when it would be recouped, and what profits the project would generate. The independent assessor will carry out such assessment as he sees fit; it is not a box ticking exercise, and there is no preparation for it. Once the assessment is carried out an offer letter will issue which will outline the conditions of the grant, how monies will be drawn down, and what is required in terms of monitoring. In order for the monies to be drawn down, certified receipts are submitted, which would then be paid within 10-14 days.

64. It is important to note that the monies actually received would be linked to a percentage of the expenditure actually incurred; in this case 26%. The applicant would not receive a lump sum. It was possible for a grantee to receive less than the amount granted if the project turned out to be cheaper, since payment was related to vouched expenses; however, a sum greater than that allocated could not be received, as the money available within the Scheme was specifically apportioned.

65. In the present case, the Defendant submitted an application in September 2003 to the Plaintiff, as Implementing Agent under the scheme, for funding of €2.46 million, plus a top up from the State of €630,000 (although the Plaintiff now contends that the latter amount was included in the former). That application received a score of 64.6 marks from the Assessment Panel, with 60 being the threshold, and thereafter was submitted to the Steering Committee in December 2003, It was, however, unsuccessful due to a lack of a cross-border element. Nonetheless, the Defendant successfully appealed the refusal in February 2004; with the Review Panel finding, according to the Defendant, that the decision not to award was unreasonable, that systems had not been properly adhered to, and that due process had not been followed. The Defendant also contends that the Review Panel agreed that had more direct support been given earlier the need for a review may not have arisen, and it criticised the Plaintiff for failing to provide support and assistance to the Defendant, as required under the programme.

66. Subsequent to these events the Defendant obtained a partner from Northern Ireland (Seaton’s marina) in order to satisfy the cross-border element, and submitted an amended application to the Plaintiff. It was the Defendant’s understanding that this application would be submitted to the Steering Committee in September 2004, however shortly before this meeting was due to take place, the Plaintiff requested further information. It stated in a letter of the 13th September 2004 that such information was sought to afford the Defendant’s project the optimum prospect of success before the Steering Committee. However, the Defendant alleges, that the Plaintiff, in or about this time, was actively considering not to submit the application to the Steering Committee (see an inter-departmental e-mail exchange dated the 17th September 2004), but it neglected to inform the Defendant of this fact.

67. The Defendant gathered the requested information and forwarded it to the Plaintiff. The Plaintiff then advised that the application would be submitted to the Assessment Panel in December 2004. At that meeting, the Panel gave the Defendant’s application a score of 66.6; two additional points being awarded by virtue of the cross-border partner. The Panel thus recommended that the Defendant’s application be forwarded to the Steering Committee for consideration. As part of this process the application was then considered by the Joint Technical Secretariat of the SEUPB, which considers applications from a “higher level objective”; considering compatibility with EU and national policies. No score is given by the Secretariat, but information is compiled and provided to the Steering Committee.

68. Following this, the Plaintiff informed the Defendant of the positive recommendation and informed it that its application would go back in front of the Steering Committee. The Plaintiff was not, at that time, in a position to indicate at which meeting, but the Defendant was aware that a Steering Committee meeting was scheduled for the 27th January 2005, and as there appeared to be no more hurdles to cross, the Defendant presumed its application would be presented then.

69. However, as stated the Defendant alleges, the Plaintiff in or about that time had in fact decided not to submit the application to the Steering Committee due to issues unrelated to the Interreg application or the Scheme; the issue being in particular those relating to the alleged breaches of the foreshore lease and the construction of the marina. The Plaintiff in fact communicated this position to the SEUPB, which replied by e-mail dated the 18th January 2005, that their understanding of the process was that:

“[Y]ou as Implementing Agents would complete your part of the process and that the project would be brought to the Steering Committee but that Members would be informed that there are outstanding issue of compliance with the Department.”

Earlier, Nuala Comican, Programme Manager for the SEUPB, had also previously written to the Plaintiff in this regard; on the 17th August 2004, she stated that:

“We do not consider that departments playing a role in development [lease, marina, etc.] would compromise that department and expect all our Implementing agents to assist Project promoters in whatever way necessary as understood by the undertaking at Ministerial level and also within the programme complement (PC Section 1.1/13.27) and contractual arrangements with the SUEPB (Contract Section 14.1/14.3). … With regard to issues relating to statutory permissions, these are outside our control and your Department’s response should be communicated to us. Despite these concerns, for completeness, I am requesting that any outstanding development work is carried out for Steering Committee to make a final and informed decision. The next Steering Committee is on the 21 September 2004.”

It was therefore the case that the Plaintiff had been advised by the SEUPB, since August 2004, that the application should be processed and submitted to the Steering Committee regardless of any issues between the Plaintiff and Defendant, arising out of the subject matter of this action.

70. Despite this, the Department did not forward the application to the Steering Committee meeting of the 27th January 2005. On the 23rd March 2005, the Chief State Solicitor’s Office wrote to Brophy Solicitors, who were acting for the Defendant, stating that they would not progress the Interreg application due to outstanding issues. This therefore stalled the process.

71. The Defendant subsequently wrote to the European Commission complaining that its application had not been submitted to the Steering Committee. Esben Poulson of the Directorate General for Regional Policy wrote to Mr. O’Connor, who was the Director of the SEUPB, on the 3rd October 2005, seeking information in relation to the refusal to sent forward the application. In particular:

“I would like to understand the reasons why the revised project application has never been put on the agenda of the Steering Committees as of September 2004 again. Apparently, the project promoter had hoped that the project application would be treated at the January 2005 meeting at the latest.

I have taken note that the selection process has not yet been concluded two years after the original application was submitted. In view of this it would be useful if you could explain the reasons behind the delay in the treatment of this application and also explain to which extent this is normal practice in your programme.”

Mr. Henry, who took over from Mr. O’Connor, replied on the 7th November 2005:

“Reason for not having application presented to Steering Committee

The lead [Implementing Agent], DCMNR, has responded as follows:

The Department of Communications, Marine and Natural Resources notified the SEUPB of the difficulties in acting as Implementing Agent for the project submitted by Figary Watersports Development Ltd as it had emerged that it was likely that legal proceedings would be instituted against Figary Watersports Development Ltd by the Department in respect of the same marina project. Subsequently, the Office of the Chief State Solicitor advised solicitors for the applicants that the Interreg application would not be progressed until all outstanding issues in relation to breaches of the foreshore lease had been satisfactorily resolved.

Advice from DCMNR to the [Managing Authority] is not to proceed with the project selection process until the legal issues have been addressed.”

The [Managing Authority] has taken all steps that it can to progress this application to a concluding stage.

The selection process has been transparent and has been applied equally to both projects referred to above [the other project being a marina at North East Inishowen]. DCMNR made the decision to seek further guidance in relation to both projects, and as legal proceedings are underway, the [Managing Authority] has been advised that it is inappropriate to take the project back to Steering Committee until these issues have been satisfactorily addressed.

It is most unusual for the selection process to take almost two years but as there are issues involved in the Figary project beyond the MA’s control, there is no other option at present.”

In effect, the SEUPB has tried to get the Department to progress the matter, but due to advice from the CSSO, it will not.

72. Throughout 2006 correspondence was exchanged between the Defendant and the Commission, and between the Commission and the SEUPB in which an explanation was sought for the Department’s failure to process this matter, whilst at the same time it forwarded an application to the Steering Committee in relation to a development by Donegal County Council of a marina at Bunrana, despite it having no foreshore lease at all. This in fact was approved (although ultimately did not receive any monies). In relation to the former, for example, Elisabeth Helander of the Directorate General of Regional Policy wrote to the SEUPB on the 10th April 2006, noting:

“[T]he Commission services ask you to explain on what base the application in contradiction to the internal procedures fixed for this programme has not been presented to the Steering Committee and to provide us with the relevant documents…”

73. Ultimately, following further correspondence, a letter was sent from the Directorate General for Regional Policy, to Ms. Doherty, of the Defendant, on the 14th December 2007, which stated:

“The services of Directorate General Regional Policy contacted the Managing authority repeatedly on 29 January 2007 and on 30 May in order to receive the exact legal base that prevents an application to be (re-)submitted to the Steering Committee.”

Having noted the documents received from the Department, which included the Procedures Manual for Implementing Agents, and Guidance Notes on the Interreg IIIA programme, the Commission continued:

“However, none of these documents does explicitly explain on what legal base the Department of Communications, Marine & Natural Resources was prevented from resubmitting your application to the Steering Committee. The only reason given by the Managing authority and the before mentioned Department is that this was based on legal advice from the Office of the Chief State Solicitor. I can assure you that this argument is not considered being satisfactory.”

However, it noted that all funding under the Interreg IIIA programme, 2000/2006, had to be realised by the end of 2008. By this time, it was therefore too late for the Defendant to avail of any remedy under the Interreg Scheme, since the window for funding under Interreg IIIA had closed and the Defendant could no longer apply. It was not open to the Defendant to apply under Interreg IV, since it had a different focus and did not apply to marine infrastructure; none of the measures under Interreg IV being applicable to the project. In those circumstances any resubmission would need to be under the new programme, but it did not know whether “this type of tourist facility would be covered by the new programme”.

74. On the 8th February 2008, Dirk Peters, Directorate General for Regional Policy, e-mailed Pat Colgan of the SEUPB. Having noted the extensive history of the Defendant’s complaint and the documents received from the Department which purported to explain the legal basis for its refusal to re-submit the application, he noted:

“I want to signal that [the Department’s] argument is not considered being satisfactory.

It is not considered best practice for good cooperation in a spirit of partnership to send a bulk of 150 technical pages without ANY indication, what exact point on what page explicitly or implicitly prevents DCMNR to represent the application. … Independently of the Chief State Solicitor’s advice, we still would like to know what are the legal basis (regulations or guidelines, both at national or programme level) that prevents an application to be submitted if certain conditions are not fulfilled, in this case for non-compliance with the terms and conditions of the foreshore lease. …

In case of late or still not sufficient answer, the Commission services could consider this lack of cooperation in breach of Article 10 of the Treaty.”

75. Pat Colgan replied to the Commission on the 13th February 2008, noting:

“[U]nder the procedures agreed for the INTERREG IIIA Programme it is the responsibility of the intermediate body (or implementing agent) to solicit and encourage application to the programme, to assess the applications in accordance with agreed criteria and procedures and to submit these for consideration and decision by the Steering Committee. The decision not to re-submit the project proposal to the Steering Committee therefore was taken by the DCMNR in its capacity as implementing agent.”

He ultimately felt that:

“The Department adhered to all the procedures and guidelines related to their role as implementing agents in this matter with the exception of re-submitting the proposal to the Steering Committee. It is also my belief that the Department did not re-submit the project proposal to the Steering Committee because, in their capacity as accounting department for this sector, they were obliged to take heed of the legal advice they had received from the Office of the Attorney General and the Chief State Solicitor’s Office. To continue to promote this project application under the circumstances in which the Department found itself would have amounted to a serious compromise for the Accounting Officer of the Department.

I cannot point you to any one rule or procedure either under the INTERREG IIIA Programme or the Department that prohibited them from re-submitting the application other than their duty as accounting department to manage public monies in accordance with best practice of governance. I believe that the Department had no choice but to take on board the legal advice it received.”

76. Finally, on the 29th May 2008, Colin Wolfe of the Directorate General for Regional Policy wrote to the SEUPB. It was concluded in relation to the complaint received:

“(i) that the reason why the complainant’s application was not resubmitted to the programme’s Steering Committee was not communicated clearly to the complainant;

(ii) that the original objection by the Steering Committee (the project did not meet the cross-border criteria) had been remedied;

(iii) that the further objections raised by the Department above should have been signalled to the Steering Committee for it to take a decision to approve/reject the project;

(iv) in effect, the Department has assumed to itself the decision of the Steering Committee.

The Commission also is of the opinion that the examination of this complaint has taken too long. In particular, voluminous documents were sent that finally turned out to be irrelevant.”

However, he notes, it is unfortunately too late for the applicant to re-submit in this case. In those circumstances the Commission recommends that the programme fix further rules and conditions of funding for the 2007-2013 programmes. Nonetheless, neither the programme selection criteria, nor the review procedures, for Interreg IV:

“make any reference for the need for project application to be in line with national rules, especially those to be implemented by intermediate or co-funding bodies or those linked to sound financial management.

I presume that you would largely be in agreement with us on these matters, but there are issues of transparency and correct procedures to which it is in all our interest to part correct attention.”

The above findings were similarly communicated to the Defendant on the 25th June 2008, noting that the complaint would thus be terminated at one of its forthcoming meetings.

Submissions:
77. The Plaintiff contends that by virtue of the 1993 lease, the terms being more particularised in the specifications subsequently agreed between the parties, in particular the 2000 drawings, and the Second Schedule thereto, the Defendant covenanted to complete the works specified, namely a marina, in accordance with planning permission, within five years of the date of the lease. Furthermore, the Defendant did also covenant: not to erect or place on the demised premises any building or works, other than those the subject matter of the planning permission for the construction of the marina without the consent of the Plaintiff; to effect the said works in accordance with the technical specifications set forth in the Second Schedule of the lease, and to construct and complete the same in accordance with the 2000 drawings.

78. Although a Grant of Planning Permission was obtained on the 8th February 1990 (para. 3 supra.), that permission lapsed without the works being completed. The Plaintiff alleges that notwithstanding such failure of the part of the Defendant, it has a continuing obligation to carry out the works in accordance with the terms of a valid planning permission. The Defendant has failed, neglected and omitted to seek a further grant of permission, and has caused or permitted the said works to become, at least in part, an unauthorised development or a material change of use, in respect of which retention permission or a valid grant of permission is required.

79. By virtue of the terms of the Second Schedule, the Defendant did covenant, inter alia, to submit technical specification of proposed works for approval by the Plaintiff prior to the commencement of such works. Despite being called upon to furnish to the Plaintiff a clear and specific schedule of works intended to be effected for the purposes of satisfactorily completing the construction of the Marina, the Defendant has failed to so do.

80. In purporting to carry out the works specified in the lease, in particular the construction of the marina, the Defendant encroached beyond the area demised in the lease. In particular, the breakwater extends and trespasses outside of the demised area. Further, the Defendant has advanced a proposal to locate a retaining wall outside the boundary of the demised property. The prior approval of the Plaintiff has not been sought in respect of such a wall, and none of the necessary statutory consents have been obtained in this regard. Such works amount to an unauthorised act which create a permanent trespass by encroachment.

81. The Plaintiff further alleges that, by virtue of the covenants and conditions in the lease contained, in particular, in Covenants 10, 11, 12 and 15, the Defendant did covenant to effect the suitable disposal of dredge spoil not otherwise disposable in the immediate vicinity of the marina, and it did not obtain prior written consent for excavation, removal or stockpiling of beach material.

82. Under the terms of the lease, the Defendant did covenant and agree to procure a Bond in the sum of IRŁ250,000 (€317,434.52) for the due performance by it of restoration works in the event of any premature termination of the works or in the event of unsatisfactory completion or abandonment of the works.

83. The Plaintiff claims that it has legitimately forfeited the lease on foot of a Forfeiture Notice dated the 12th June 1998, which was served pursuant to s. 14 of the Conveyancing Act 1881. This it did because of the non-payment of rent and rental sums by the Defendant, and due to ongoing breaches, non-observance and non-performance of the covenants and conditions as specified under the lease. These breaches have continued since the service of the Notice of Forfeiture and continue to this date, despite significant accommodations of time on the part of the Plaintiff. In particular, notwithstanding these accommodations, the Defendant has failed, neglected and omitted to comply with the specifications, plans and drawings agreed between the parties, as embodied in the 2000 drawings.

84. Reliance is placed upon the Northern Irish Court of Appeal decision in McIlvenny v. McKeever [1931] NI 161 to the effect that even if there had had been a waiver of the Forfeiture Notice, there were still good grounds to treat the issuing of the proceedings as an act of re-entry under the terms of lease, by reason of the continuing and ongoing nature of the breaches by the Defendant. Thus even if the proceedings could not be grounded upon the Forfeiture Notice, there is still an action for re-entry in its own right, and in any event it has a case for rent arrears of over a year under s. 52 of Deasy’s Act. Reliance is also placed on the decision of Laffoy J. in Moffet v. Fribsy [2007] IEHC 140 and G.S. Fashions Ltd. v. B. & Q. plc. [1995] 1 W.L.R. 1088.

85. The Plaintiff notes that technically the Defendant has not sought any relief against forfeiture, and thus the Notice of Forfeiture may still be relied upon. Nonetheless, even if the Court should give the Defendant latitude in this regard, it should only be granted on very strict terms, and would have to include the following:

i) Rendering of the breakwaters safe for vessels and persons in the vicinity;

ii) Restoring of the foreshore where sand has been removed, or else paying the Minister the appropriate cost of so doing; and,

iii) Provision of a proper Schedule of Works and a realistically costed bond.

86. The Defendant would also have to pay for the trespass identified. The quantum of damages for such should be calculated at a rate commensurate with the rent otherwise payable under the lease, namely IRŁ18,000 per annum. This calculates at €29,750 per 10 hectares per annum. The Plaintiff has performed a pro rata calculation, and claims that compensation for the trespass is thus somewhere in the region of €50,000 to date.

87. In essence the Plaintiff is seeking:

i) The construction of the marina by the Defendant in accordance with the covenants and conditions contained in the lease of the 26th April 1993 and with drawings made by Ove Arup in 2000 (reference: C644/10/01 Revision CI) (“the 2000 drawings”); as well as in accordance with the Planning Acts and any necessary or requisite planning permission;

ii) Rent arrears due from the 1st January 1993 to date;

iii) The procurement of a Bond from an insurance office for the sum of €317,434.52 (IRŁ250,000) as covenanted for in the lease;

iv) The removal of structures, including breakwaters and/or rock armour, which project beyond the boundaries of the premises demised in the lease;

v) To prevent any unauthorised encroachment by the development on the foreshore;

vi) The transportation and disposal of material removed from the site, including dredge spoil and other materials, such as allowed, in accordance with all consents, licences, permits and authorisations;

vii) Damages for breach of covenant, nuisance and trespass;

viii) In the alternative, possession of the property on foot of a Forfeiture Notice dated the 12th June 1998, pursuant to s. 52 of the Landlord and Tenant Amendment (Ireland) Act 1860 (“Deasy’s Act”), there being more than one year’s rent in arrears;

ix) Further in the alternative, mesne rates and/or mesne profits in such amount as the Court determines to represent the open market value, up to date or until possession is delivered to the Plaintiff.

However, it has been indicated to the Court that although the Plaintiff was originally seeking the Defendant to perform various works and in the alternative was seeking possession, the present situation is such that the primary relief now sought is possession; the Defendant has done very little despite persistent calls and is effectively a “bad tenant” whom the Plaintiff wants out. Furthermore, at this stage the Defendant still owes €206,749 in rent, although it has, on four occasions since May 2006, paid €136,080 to the Plaintiff in consideration of such rent.

88. Furthermore, in relation to any question of the Statute of Limitations running on the monies owed under the lease, the Plaintiff draws attention to a number of letters which it says are, or are capable of being construed as, acknowledgement on the part of the Defendant. In particular:

i) Letter of the 26th January 1998;

ii) Letter of the 8th April 1998;

iii) Letter of the 11th May 1998;

iv) Letter of the 4th December 2002;

v) Letter of the 12th December 2002;

vi) Letter of the 14th January 2003;

vii) Letter of the 18th June 2003;

viii) Letter of the 1st April 2005.

89. In reply the Defendant accepts that it entered into the lease in 1993, but makes no admission as to its obligations in respect of rent as alleged, including the alleged aggregate sum due and owing to the Plaintiff. The Defendant claims that in or about the 26th February 1998 the Plaintiff entered into an agreement with the Defendant whereby it was agreed that the rent, including that then due, would be remitted or waived in whole or in part. This agreement constituted a variation of the lease, in particular with regards to the rent and rent review clause thereof. Alternatively, the agreement was collateral to the continuing obligations of the parties to perform their obligations under the lease.

90. The Defendant claims that it was an implied term of the lease, as varied or otherwise, that, in order to give the contract business efficacy and/or to represent the intention of the parties, the amount of rent payable thereunder would be predicated upon, and be fairly and reasonably ascertained by reference to, the development costs, grant availability and commercial activity of the marina. In those circumstances, the rent now claimed by the Plaintiff is neither fair nor reasonable.

91. The Defendant alleges that by virtue of representations made, the Plaintiff has warranted that:

i) It would remit and/or waive the rent;

ii) The lease was subsisting;

iii) The Defendant would be entitled to carry out the works; and,

iv) For that purpose, the Plaintiff would not unreasonably withhold such consent and permissions as were necessary.

On foot of such alleged representations, the Defendant claims that in reliance of the same it has remained in possession of the premises and has incurred considerable expense and has made great efforts in developing the marina facilities under and in accordance with the lease. Further, the Plaintiff is estopped from now asserting that all of the rent is due, or in alternative, the Defendant had a legitimate expectation that the Plaintiff would consider favourably the Defendant’s claim to rent remission and/or waiver of the rent. In those circumstances the Defendant is entitled to deduct from the rent such sums so expended.

92. Furthermore, the Defendant alleges in its counter-claim, that the Plaintiff is liable to it for damages, inter alia, for breach of covenant, breach of contract and misrepresentation, and the Defendant is entitled in law and/or equity to set off the said damages, when ascertained, against such sum of rent as may be due and owing to the Plaintiff under the lease. In support of such deduction or set-off, reliance is placed upon s. 48 of Deasy’s Act.

93. As an aside it might be noted, regarding rent reviews, the Defendant denies that it has any liability for revised rent in circumstances where the Plaintiff has not served any notice in respect of such, where there has been no agreement relating to revised rent, and where no reference of the question to arbitration has been made. Further, under the construction of the rent review clause, contained in the lease, time is of essence for the service of the notice for rent review. The Plaintiff, having failed to call for a rent review within three months prior to the previous review dates, has consequently lost the right to call for same.

94. In any event, the Defendant claims that the Plaintiff’s claim for rent herein, prior to six years before the commencement of these proceedings, is barred by the provisions of the Statute of Limitations as amended.

95. The Defendant denies that it has a continuing contractual obligation to carry on the works in accordance with the terms of a valid grant of planning. It therefore denies that it has failed, neglected or omitted to seek a further grant or that it has caused or permitted to exist, in whole or part, an unauthorised development or a material change of use, for which retention permission or a valid grant is required. Without prejudice to this, the Defendant notes that no planning permission is required for any development below the high water mark, and the Plaintiff has expressly acknowledged and affirmed such by letter dated the 2nd March 2000.

96. Further and in the alternative, if the Defendant was required to obtain a valid grant of planning permission, its failure to do so was caused in whole or part by the wrongful acts, including delays, of the Plaintiff.

97. The Defendant denies that the Plaintiff called upon it to furnish technical specifications of proposed works, and thus denies that it failed, neglected or omitted to do the same. On the contrary, the Defendant has at all times faithfully and diligently furnished such specifications when requested, yet the Plaintiff, in breach of its obligations under the lease and despite repeated reminders over a protracted period, has failed, neglected and omitted to act on the same.

98. In relation to allegations that the Defendant failed to seek or obtain prior contractual approval for works from the Plaintiff or obtain required statutory consents, the Defendant claims that it did at all times faithfully and diligently seek such approvals and consents, but the Plaintiff failed, despite repeated reminders, to act on the same. Furthermore, the Defendant denies that the breakwater, or any other part of the marina, encroached outside of the boundaries of the demised premises, or otherwise created a permanent trespass. In relation to drawings these were created by the Defendant at its expense and at the request of the Plaintiff, and thereafter provided to the Plaintiff. However, for reasons wholly extrinsic to the contractual relations of the parties, the proposal was not accepted by the Plaintiff or put into effect, and therefore the proposal did not result in any works. Furthermore, the Defendant alleges, the Plaintiff has acted with mala fides by later claiming that the proposal was in breach of the provisions of the lease.

99. In relation to the excavation material, the Defendant denies that it has failed to effect suitable disposal of such, or that it has failed to obtain the prior written consent of the Plaintiff for excavation, removal and/or stockpiling of beach material; the Defendant has at all times sought the required consent, but the Plaintiff, in breach of its obligations under the lease and despite numerous reminders, has failed, neglected and omitted to act on the same.

100. The Defendant claims that the Prohibitory Notices have expired. However, without prejudice to this, the Defendant has at all times contested their validity; moreover following discussions it was agreed that the lease was subsisting and that the Notices should be disregarded so as to enable the Defendant to construct the marina in accordance with the terms of the lease and the then agreement of the parties.

101. In relation to an alleged requirement to obtain a performance bond, the Defendant states that such is no longer required having regard to: the substantial completion of the works; the significant investment of the Defendant in the marina; and, the demonstrated commitment of the Defendant to complete the works.

102. In relation to the Forfeiture Notice, the Defendant claims that such was withdrawn by the Plaintiff on or around the 19th May 2000 on terms where it was agreed that: the Defendant would be entitled to carry out the works; to facilitate this, the Plaintiff would furnish the Defendant with all necessary consents and permission; and, such permissions would not be unreasonably withheld. The Plaintiff also recognised that the lease was subsisting. The Defendant denies that the effect of the 2000 drawings was only to modify the Forfeiture Notice as alleged. Rather the Notice is no longer valid and has no legal effect. Notwithstanding this, the Defendant claims that it did not commit any breach of covenant or conditions in the Forfeiture Notice. It specifically denies that it has failed to perform its obligations under the agreement as reached or under the 2000 drawings.

103. The Defendant denies that the Plaintiff is entitled to mesne rates or mesne profits. The conduct of the Plaintiff has prevented the operation of the marina to its commercial potential and this reduced the profits of the Defendant. In those circumstances it would not be equitable to impose any liability for mesne rates and/or profits on the Defendant.

104. The Defendant makes two further allegations with regards to the lease in its counterclaim, in particular that it was an express or implied term of the lease that the Defendant would be permitted to construct the marina on the premises and that the Plaintiff would furnish to the Defendant all necessary consents and permissions for that purpose. It was also implied that the Plaintiff would not derogate from its grant to the Defendant. Secondly, the Defendant states that it has faithfully and diligently sought to perform its obligations under the lease, and has worked tirelessly to do so, but it has been frustrated by the Plaintiff, which has unreasonably withheld and delayed furnishing the required consents and permissions.

105. The Defendant is also seeking damages for the actions of the Plaintiff in frustrating the Interreg IIIA application. It claims that such is an actionable breach of statutory duty, relying on the test enunciated in Glencar Exploration plc. v. Mayo County Council (No. 2) [2002] 1 IR 84 (“Glencar”), and that the Plaintiff’s actions were ultra vires its statutory role. Even if it is not an actionable breach of statutory duty, the Plaintiff was negligent, or else negligently misrepresented that it would resubmit the application, and such representations were reasonably relied upon by the Defendant to its detriment (Wildgust v. Bank of Ireland [2006] 1 IR 570). It did not re-submit, so the Defendant lost its chance of funding. In this context it states that the Court should take a two stage approach as borne out by the case law. As a result:

i) the Defendant must prove as a matter of causation that the chance was real or substantial, and not merely speculative; if this is proved,

ii) the Defendant is entitled to damages, which will be measured through an evaluation of the probability of that chance, with the quantum of damages being calculated accordingly (see Chaplin v. Hicks [1911] 2 KB 786; Davies v. Taylor [1974] A.C. 207; Allied Maples v. Simmons & Simmons [1995] 4 All ER 907; First Interstate Bank of California v. Cohen Arnold & Co. [1996] P.N.L.R.; North Sea Energy Holdings HV v. Petroleum Authority of Thailand [1998] EWCA Civ 1953; Paul & Others v. Ogilvy [2000] Scot CS 19; Redmond v. Minister for the Environment [2004] IESC 24); Quinn (A minor) v. Mid-Western Health Board [2005] IESC 19).

In the present circumstances, the Defendant suggests that if the Court assumed that the chance of getting the grant was approximately 70%, this would equate to damages of approximately €1.722 million, plus loss of earnings of €1,558,221: in total €3,280,221.

106. In summary, the Defendant alleges that the Plaintiff is in breach of covenant and statutory duty in that, inter alia:

i) It has frustrated the development of the marina by failing to consider requests for authorisations and permissions within a reasonable time or at all, or by unreasonably withholding such permissions, and has failed to carry out its statutory powers and duties in relation to such authorisations in accordance with s. 3 of the Foreshore Act 1933;

ii) It has imposed unreasonable or irrelevant requirements in relation to the Schedule of Works;

iii) It has imposed unreasonable requirements for the certification of subcontractors, and has unreasonably sought to restrict the Defendant’s freedom to contract in relation thereto;

iv) It has imposed unreasonable requirements in relation to the preparation of an Environmental Impact Statement, and has unreasonably insisted upon the securing of a waste collection permit from the EPA where none was required;

v) It has prevented the Defendant from negotiating and securing a performance bond in respect of its works, it insisted upon such a bond in circumstances where the agreed purpose of such had been met and where it was no longer required, and it imposed unreasonable requirements in relation to the amendment thereof;

vi) It had a duty to adequately and properly inspect or survey the boundaries of the leased premises, in circumstances where it has accused the Defendant of transgressing those boundaries;

vii) It has failed to respond to and determine the Defendant’s requests for the removal of beach material within a reasonable time or at all, despite being furnished with all relevant information in that regard;

viii) It has failed to assist the Defendant in its dealings with Donegal County Council;

ix) It has prevented the Defendant from securing and/or failed to reasonably assist the Defendant in securing funding under relevant EU structural funds;

x) It has consistently declined to deal with the Defendant in relation to the possible purchase of the leasehold interest in the premises based upon objective criteria consistent with the sale of similar lands and resources elsewhere in the State.

These breaches amount to a breach of the implied term not to derogate from the grant. Furthermore, the failures of the Defendant constituted a breach of the representations and warranties of the Plaintiff.

107. As a consequence of the alleged breaches by the Plaintiff, the Defendant claims that it has suffered loss and damages in respect of over €2.8 million invested in the marina, and also has been prevented from developing and/or operating the marina. The Defendant notes that other marinas in the area have received authorisations, permissions and funding without the constraints imposed or delays caused by the Plaintiff. The Defendant has thus suffered substantial and ongoing loss of profit.

108. In reply, the Plaintiff responds that:

i) The Defendant has strayed too far from its pleaded case in relation to allegations of delay caused by the Plaintiff;

ii) The Defendant itself is guilty of delay with regards to its allegations of unlawful conduct – in particular its failure to act sooner with regards to the alleged unreasonable withholding of consent;

iii) The case law with regards to non-derogation from grant is distinguishable and non-applicable;

iv) With regards to the issue of the definition of “waste”, and the issue of dredge spoil, no explanation is forthcoming as to why the Defendant did not engage an expert in relation to same when problems were initially encountered;

v) Regarding the Schedules of Works, the Plaintiff notes that there were issues with regard to:-

a) the May 2000 Schedule of Works in a memo sated the 18th January 2001, and later in a letter from the Plaintiff dated the 27th July 2001,

b) the October 2003 Schedule of Works was a one page note from Arup and not in fact a Schedule of Works at all,

c) the April 2005 Schedule of Works was incomplete and insufficiently detailed, despite having the Plaintiff’s template which was drafted in May 2004 and sent to the Defendants with a letter dated the 2nd December 2004,

a satisfactory Schedule of Works was thus not furnished until the 15th August 2005;

vi) With regards to the Interreg grant:-

a) the €2.46 million was inclusive of the €630,000 top-up, not in addition to it;

b) the Defendant has failed to identify the specific statutory provision claimed to have been breached in respect thereto;

c) Statutory entities should not be held liable for the honest and bona fide discharge of their legal duties (Pine Valley Developments v. Minister for the Environment [1987] I.R. 23 (“Pine Valley”));

d) the Interreg system is not statutory, nor does it amount to an acte claire as to be directly enforceable – the system is effectively ad hoc;

e) the Defendant’s own actions prevented the matter from going before the Steering Committee;

f) the Plaintiff obtained legal advice from the Attorney General’s office with regards to the procedure;

g) in any event, the Defendant only had a speculative chance of getting the grant, because the purported cross-border element which the Defendant sought to rely upon was of only a very minor nature (an investment of €162,000), and because of the irregularities identified in the grant application and the Defendant’s failure to comply with many basic conditions, including the regularity of its title to the marina.

The Forfeiture Notice and Breach of Covenants:
109. The starting point with regards to forfeiture must be s. 14 of the Conveyancing Act 1881. Subsection (1) states that:

“A right of re-entry or forfeiture under any proviso or stipulation in a lease, for breach of any covenant or condition in the lease, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice specifying the particular breach complained of and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and, in any case requiring the lessee to make compensation in money for the breach, and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.”

Thus, put succinctly, where a breach of covenant or condition is alleged by a lessor, he must serve a notice upon the lessee setting out the breach and giving reasonable time for remedy thereof, before he may exercise or enforce his right of re-entry or forfeiture. Subsection (2) provides that where a lessor seeks to enforce such a right of re-entry or forfeiture, by way of action or otherwise, the lessee may apply to the Court for relief against such forfeiture, and the Court may grant or refuse such relief:

“as the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, thinks fit; and in the case of relief may grant it on such terms, if any, as to costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain like breach in the future, as the Court, in the circumstances of each case, thinks fit.”

It is thus clear from subs. (2) that where relief against forfeiture is sought the Court has a wide discretion in the exercise of such, as well as the terms upon which it may be granted. It should of course be noted that s. 14 does not affect the law relating to re-entry or forfeiture based on non-payment of rent; this is covered by s. 52 of Deasy’s Act. This issue will be considered separately infra.

110. Although s. 14(1) requires the notice to specify “the particular breach complained of”, the Northern Ireland Court of Appeal in McIlvenny v. McKeever [1931] N.I. 161 at 175 held that “a notice under s 14 referring to several breaches is not invalidated in toto, because some of them never took place and have to be abandoned.” Furthermore, the notice need not go into specific details of the breach provided that it indicates to the lessee that he effect a remedy, if the breach is capable of remedy (Wylie, Landlord and Tenant Law (2nd Ed.), at paras. [24.14] – [24.15]). Wylie notes, however, that courts have in recent times taken the view that almost all breaches are capable of remedy, with regards to both positive and negative obligations, even where the covenant has stated that “time was of the essence” in the performance of the obligation (ETS Vehicles Ltd. v. Fargate Developments Ltd [1997] N.I. 25). A distinction should be drawn between a notice to terminate or quit, which has the effect of terminating the tenancy, and a notice of forfeiture which rather is a statutory warning which, in the event of non-compliance, may result in the termination of the tenancy by further action. Thus, in this regard, the right of re-entry or forfeiture is not enforceable unless and until the lessee fails to remedy the breach within a reasonable time. If a lessee is not given a “reasonable time” to remedy the breach, the proceedings for possession will fail.

111. Once the above requirements are complied with by the lessor and the lessee fails to remedy the breach, the former is entitled to re-enter the premises peaceably (Bank of Ireland v. Lady Lisa Ireland Ltd. [1992] 1 I.R. 404), or else issue proceedings for ejectment.

112. Considering the Notice of Forfeiture issued in this case on the 12th June 1998 it would appear to me that at the time of its issue it was a valid Notice because:

i) It was issued pursuant to s. 14 of the Conveyancing Act 1881;

ii) It was addressed to the Defendant and its directors;

iii) It recited the alleged breaches of covenant;

iv) It called upon the Defendant to remedy the identified breaches, as far as they were capable of such, “within a reasonable time”; and,

v) It called upon the Defendant to pay compensation.

There is thus no question in my mind that had the Plaintiff sought repossession of the premises on foot of this Notice in the months following its receipt by the Defendant, in circumstances where the breaches were not remedied, it would have been able to validly rely on this Notice. However, given the intervening events and the significant time between the issue of the Notice and the current proceedings for ejectment, a question arises as to whether the Plaintiff may still rely upon such.

113. Before considering in detail whether the Forfeiture Notice is still valid, a number of basic and uncontroverted principles with regards to forfeiture notices and their effect can be stated. Firstly, once a forfeiture notice has been served upon a lessee, the lessor may no longer rely on any remedies based on the continuance of the lease (Law Reform Commission on Consolidated Landlord and Tenant Acts (LRC 28 2003) referred to in the judgment of Laffoy J. in Moffat v. Frisby [2007] 4 I.R. 572 (“Moffat”)). Thus, as stated in Wylie On Landlord and Tenant (2nd Ed.), at para. [24.25], referring to the judgment of Henchy J. in O’Reilly v. Gleeson [1975] I.R. 258:

“Since, as Henchy J. explained, the effect of a forfeiture is to render the lease or tenancy void ‘in every respect’, it follows that the landlord can no longer rely upon it. By electing for the remedy of forfeiture he thereafter deprives himself of remedies based upon the continued existence of the lease or tenancy. He cannot sue, therefore, for rent accruing due after the forfeiture has been effected, though he can sue the tenant or any guarantor for rent accruing due up to that time. The same applies to enforcement of other provisions in the lease, such as covenants for repair. Since forfeiture involves, as again Henchy J. explained, an election by the landlord for a particular remedy, it would seem to follow that he cannot use this election to found a claim against the tenant in respect of matters which are a consequence of that election.”

Wylie also cites G.S. Fashions Ltd. v. B. & Q. Plc. [1995] 1 W.L.R. 1088, following Jones v. Carter (1846) 15 M. & W. 718.

114. Laffoy J. in Moffat, considering, inter alia, the above passage in Wylie and the cases relied upon, noted at para. 25 that:

“In my view, the legal position is that when a lessor serves a forfeiture notice and seeks to enforce it by ejectment proceedings or, alternatively, by counterclaiming in the lessee’s action seeking relief against forfeiture for a declaration that the lessee is not entitled to such relief, thereafter the lessor is not entitled to treat the terms of the lease as binding the lessee.”

115. In G.S. Fashions Ltd. v. B. & Q. Plc. [1995] 1 W.L.R. 1088, Lightman J., cited with approval the words of Parke B. in Jones v. Carter (1846) 15 M. & W. 718 at 726, which stated:

“[T]he bringing of ejectment for a forfeiture, and serving it on the lessee in possession, must be considered as the exercise of the lessor’s option to determine the lease; and the option must be exercised once and for all … for after such an act, by which the lessor treats the lessee as a trespasser, the lessee would know that he was no longer to consider himself as holding under the lease, and bound to perform the covenants contained therein … and it would be unjust to permit the landlord again to change his mind and hold the tenant responsible for the breach of duty, after that time.”

Following the quote Lightman J. continued:

“

The words of Parke B. were uttered in the context where the breaches of covenant by the lessee and the entitlement of the lessor to forfeit were established. The words and the same principle have been applied in cases where, after the service of the writ, the lessee has challenged the lessor’s right to forfeit or claimed relief from forfeiture. In such a situation the validity of the forfeiture must await to be determined either by the court or by agreement of the parties. In the meantime there is inevitably a twilight period of some uncertainty. During this period the lessor is on the principle stated by Parke B. precluded from treating the terms of the lease or the covenants in the lease as on foot as against the lessee; but the lessee who has not elected to determine the lease can seek to rely on and enforce the covenants in the lease against the lessor: see e.g. Peninsular Maritime Ltd. v. Padseal (1981) 259 E.G. 860, 866 and Associated Deliveries Ltd. v. Harrison, 50 P. & C.R. 91

.” ([1995] 1 W.L.R 1088 at p. 1093)

In that case a question had arisen as to whether, in circumstances where the lessor had served a notice of forfeiture which had been accepted, he could then resile from that position and rely upon the lease, in circumstances where the original service of the notice was done on foot of a mistaken belief or misapprehension as to whether the lessee had breached a covenant. The Court ultimately held that the lessor was not so entitled.

116. Recently Laffoy J. gave a detailed consideration of the case law in this area in Foley v. Mangan [2009] IEHC 404. A number of issues were considered in that case, in particular: whether there was a default by the lessee in his obligation to pay rent, so as to give rise to an entitlement on the part of the lessor to re-enter under the terms of the lease or at common law; if there was a breach of covenant in the lease, whether the forfeiture notice was valid for the purposes of s. 14 of the Conveyancing Act 1881 (“the 1881 Act”), and if so whether the breaches were remedied prior to the initiation of the proceedings; if the initiation of proceedings did effect a forfeiture was this waived by the lessor’s subsequent conduct; or alternatively if the lessor was entitled to forfeit the lease when proceedings were initiated, whether the lessee was entitled to either equitable relief or statutory relief (under s. 14 of the 1881 Act) against forfeiture.

117. Ultimately if the Notice of Forfeiture is valid then the landlord cannot rely on any remedies based on the continuance of the lease after the date of its service. This is a long-established position. Once a lessor elects to treat the lease as void, having done so by virtue of conduct on the part of the lessee which has rendered in voidable, he may not rely on any of its provisions. If successful the lease will be void as and from the date of the service of the Notice. It is not possible to partially void the lease, as in practice such would involve rewriting the lease, thereby producing a contractual relationship and a leasehold estate different to that originally envisaged by the parties and expressed in the lease (O’Reilly v. Gleeson [1975] I.R. 258 at 274). If the forfeiture is upheld then the lessor may not rely on any breach of covenant or non-payment of rent under the lease after the issue of the Notice; instead being entitled to mesne profits or rent from the then trespassing former tenant.

118. There are however two ways in which the lease will be subsequently held to have not been forfeited, either (i) the Court grants relief against forfeiture, or (ii) through agreement of the parties. With regards to relief against forfeiture, Kennedy C.J. in Whipp v. Mackey [1927] I.R. 372 at 385 emphasised that (i) the relief is a matter for exercise of judicial discretion; (ii) a very strong case should be made for refusal where the forfeiture is based solely on the non-payment of a sum of money; (iii) where the forfeiture is only to secure payment of that money, and no injury has resulted from the delay in payment or only such injury as payment of interest, plus costs, would be full compensation, the equitable relief against forfeiture should not be refused. Wylie notes that these principles were subsequently applied by Hamilton J. in Trustees of Bective Rangers v. Trustees of Merrion Cricket Club (Judd v. McAlinden) (High Court, Unrep., 28th March 1980):

“[A] licence given to the Rugby Club to use the Cricket Club’s ground was forfeited for non-payment of ‘rent’ and other alleged breaches of agreement. Hamilton J. granted relief to the Rugby Club on condition that, inter alia, arrears of ‘rent’ were met and payment in lieu of maintenance was made.”

(para. [3.06])

Nonetheless, as a matter of discretion, the Court may have regard to the appropriate circumstances surrounding the lease and the relationship between the parties. Thus in the current case the course of dealing before and after the service of the Forfeiture Notice should be considered when deciding whether, as a matter of discretion, relief should be granted to the lessee.

119. This issue will only arise under s. 14(2) of the Conveyancing Act 1881 if the Notice of the 12th June 1998 has forfeited the lease. Even if not, relief may have to be considered if re-entry has taken place under s. 52 of Deasy’s Act, but first the effect of the parties’ conduct on the Forfeiture Notice. Firstly, it is clear from looking at the correspondence subsequent to the service of the Notice that the parties were actively engaged in attempting to gain compliance with the covenants contained in the lease. In this regard the Plaintiff continually sought to rely on these covenants. As stated, once a Notice of Forfeiture is served the lessor may no longer rely upon the terms of the lease. It is patent that the Plaintiff continually sought to rely on these after the service of the Notice, whilst it is equally clear that the Defendant never accept the notice. In those circumstances it could be inferred that there was some agreement between the parties that the lease, and thus the covenants therein, continued to be active. In my opinion, it would ordinarily be necessary that a continuing intention on the part of the lessor be shown (notwithstanding the special circumstances considered in G.S. Fashions). This could not be said to be the case here. Furthermore, having considered the correspondence between the parties, notwithstanding the above, the Plaintiff stated in a letter dated the 19th May 2000 that “your clients are hereby authorised to commence works on site forthwith. As indicated in the concluding paragraph of my letter, the Department confirms that the Lease is active.” The full context of this letter is set out at para. 36 supra. Whatever the Plaintiff’s intention: the wording of its correspondence and the Defendant’s acceptance of the stipulated conditions are clear: on and from the 19th May 2000, the lease was active: the Forfeiture Notice as such ceased. It is thus clear that the Department considered that, by this stage at least, the lease was active and enforceable. However, I would note, that notwithstanding such express admission, and independent of it, I would still be inclined by virtue of the overall dealings between the parties, to infer that the lease was active, and the Notice effectively abandoned by consent of the parties.

120. Even if it could not be held that the Notice ceased to have legal effect, I would be disposed to grant relief against forfeiture having regard to general equitable principles as applied to the most unusual, even unique, circumstances of this case. It has long been established that delay defeats equity; vigilantibus, non dormientibus jura subveniunt (see e.g. Lennon v. Hanly [1981] I.L.R.M. 84; Howard v. Commissioners of Public Works in Ireland (O’Hanlon J., High Court, Unrep., 3rd December 1992); and, Smith v. Clay (1767) 3 Bro. C.C. 639, 640n). Indeed in the current circumstances, it is relevant to consider that when a Notice of Forfeiture is served, a lessee must be given a reasonable opportunity to remedy any breaches identified within a reasonable time, should such be possible. It must, in my opinion, be a corollary of this that, once a reasonable period has been allowed, the lessor must then act upon such failures if not remedied within that time. It could not be equitable for a lessor to hold the threat of forfeiture over the head of the lessee indefinitely; like the sword of Damocles. Where a considerable time has elapsed between the service of the Notice and any attempted enforcement thereof, such must weigh strongly in favour of relief; if indeed not also regarding its continuing validity. In this case over seven years elapsed between the service of the Notice and the commencement of the within proceedings. This could not be considered a reasonable period. The equitable principles of laches and delay must necessarily apply to any application based on this Notice, and I would therefore also, or in the alternative, grant relief against forfeiture on this ground.

Re-entry for rent arrears (s. 52 of Deasy’s Act):
121. It should first be noted that unlike forfeiture, where it is presumed that the lease is void from the date of service of the Notice, proceedings for ejectment for non-payment of rent are primarily proceedings to enforce the payment of rent under the tenancy which continues to exist, but with the possibility that an order of possession will be granted if rent is not forthcoming. The key provision, as noted, is s. 52 of Deasy’s Act, which states:

“Whenever a year’s rent shall be in arrear in respect of lands held under any fee farm grant, lease, or other contract of tenancy, or from year to year, and whether by writing or otherwise, it shall be lawful for the landlord immediately thereon, and before the expiration of the time, if any, limited for re-entry thereupon in any lease or agreement, to proceed by ejectment for the recovery of possession of the said lands in any of the superior courts of law at Dublin, or, where [the rateable value does not exceed Ł200] in the [Circuit Court]; and the plaintiff’s right to sue as such landlord shall not be defeated by proof merely that the legal estate in the rent or lands vested in any other person not a party to such suit or proceedings, but who would be a trustee for the plaintiff, provided that the plaintiff was at the time of the institution of such suit or other proceedings the person substantially and beneficially entitled to the said rent.”

122. Before continuing further, however, the amount of rent actually due must be considered. In this regard there are two conflicting claims. The Defendant claims that all or part of the rent due was expressly waived by the Minister(s). In contrast, the Plaintiff claims that all rents since the commencement of the lease in 1993 are still due, and the operation of the Statute of Limitations 1957 does not affect this because of acknowledgments on the part of the Defendant to the rent due.

123. With regards to the alleged representations by various Ministers on behalf of the Plaintiff, it is clear that discussions were had between the parties with regards to the possibility of waiving all or a portion of the back rent due. Although I have no doubt that the Minister had the power to remit the rent, the representations must be seen in the context in which they were given; namely discussions with regards to the completion of the marina. In any event all discussions as to rent were of the nature of representation that “it would be looked into”. At no point was it expressly represented to the Defendant that the rent due would be waived; only that it might. It was therefore part of a negotiation. Whilst I accept that the Defendant may have expected something to come from these negotiations, the actual representations made were not such that the Defendant can rely on them in law so as to bind the Plaintiff. Even taken at their highest, the representations made to the Defendant were conditional and of a tentative nature. I would therefore hold that there were no representations capable of binding the Plaintiff, which the Defendant could legitimately rely upon, to remit or waive all or any portion of the rent. Nor could the representations of the Minister amount to an implied term that the rent would be “predicated upon and be fairly and reasonably ascertained by reference to development costs, to grant availability and to the commercial activity of the Marina” and that it would therefore not commence until 2002, when the marina became active, as suggested by the Defendant in its letter of the 4th December 2002. It is thus the case that rent began to be due under the lease from 1993.

124. Notwithstanding that rent technically began to run from 1993, the period under the Statute of Limitations 1957 for the recovery of debts is six years (s. 27). This period will recommence if there is acknowledgment (ss. 56 and 58) or part payment of the debt (s. 65). With regards to the rent in this case it is alleged that the Defendant made several acknowledgments in relation to back rent owed (para. 88 supra.). In this regard the Plaintiff has sought to rely on acknowledgments from 1998 and 2006. I have considered the correspondence in which these were given and it is clear that at no point were they express acknowledgments. Despite my previous finding, that there was no agreement to waive back rent, any statement by the Defendant in relation to rent owed must also be seen in light of its ongoing negotiation to get all or part of the rent remitted; something which, as stated, I have no doubt could have been done by the Minister had he wished – although he did not in fact so do. I am therefore satisfied that the alleged acknowledgments of debt in 1998 cannot be considered acknowledgments for the purposes of ss. 56 and 58 of the Statute of Limitations 1957. With regards to the alleged acknowledgments in 2006, there was that time a clear dispute as to what rents exactly were due; the Defendant was clear that it was only accepting that rent started to fall due from 2002. It could thus also not be the case that the payments made by the Defendant, in the circumstances, could have been taken by the Plaintiff to be part payment of rents prior to that period (which were not admitted by the Defendant), for the purposes of s. 65 of the Statute of Limitations 1957. The Plaintiff could not be entitled, as it has suggested, to allocate such monies to such debts as it wished; they discharge those debts, or part of those debts, which are admitted only.

125. Even should I be incorrect with regards to the acknowledgments of 1998, I should note that such could not have any effect since although they would restart the Statute of Limitation period of six years at that time, therefore covering all rent pre-1998, the period of six years would have run in 2004. Since these proceedings were not commenced until 2005, the acknowledgments from 1998 cannot be relied upon. I would thus hold, in any event, pursuant to the six year limitation period, the Plaintiff is entitled only to rents accruing on or after six years prior to the commencement of these proceedings; that is since 1999. In light of my findings with regards to the representations to remit rent, the amounts due from this time would be at the full yearly amount (IRŁ18,000 / €22,855.29 per annum), as the lease commenced in 1993. The amount due therefore between 1999 and 2005 is IRŁ108,000 / €137,131.71, or to date IRŁ198,000 / €251,408.14.

126. Given the above conclusions, the first part of s. 52 of Deasy’s Act would seem uncontroversial in the present case. It is patent that in excess of a year’s rent, howsoever measured, is currently due and owing to the Plaintiff. It is also uncontroversial that a tenancy exists, or at least existed, between the parties, and that the Plaintiff is the person entitled to rent in respect thereof. It should also be noted that unlike forfeiture, there is no requirement, by virtue of s. 53 of Deasy’s Act, to prove the making of any demand for the rents due, or any intention to re-enter.

127. It would seem to me that once the Plaintiff has shown that the Defendant is a tenant who has failed to pay at least one year’s rent, howsoever measured, the Plaintiff is entitled to an order of possession under s. 52. Nonetheless, it should be borne in mind, and the Plaintiff should be aware, even had possession been ordered, the Defendant could have obtained a stay of execution by tendering, at any time before execution, the rent stated as due in the decree.

128. In light of this and noting my other findings herein, and in the exercise of my discretion, I would therefore refuse relief under s. 52 of Deasy’s Act and allow relief against forfeiture on this ground, subject however to the orders of the Court outlined infra.

129. The Defendant has also noted that s. 48 of Deasy’s Act provides:

“All claims and demands by any landlord against his tenant in respect of rent shall be subject to deduction or set-off in respect of all just debts due by the landlord to the tenant.”

In this regard, and/or in light of the general legal and equitable principles of set-off, I would concur that any damages against the Plaintiff as a result of the Defendant’s counter-claim will be set-off against the rent due.

Unreasonable withholding of Consent:
130. The Defendant has alleged that notwithstanding any breach of covenant which it has committed, although not admitted, such was due in whole or in part to the conduct of the Plaintiff. In particular, the Plaintiff has unreasonably withheld its consent, or otherwise placed unreasonable conditions upon its receipt. For the purposes of clarity it should be noted that no provision in the lease stated expressly that the Plaintiff’s consent “would not be unreasonably withheld”, however I am satisfied as a matter of equity that it would be wrong to allow a lessor to rely upon breaches of covenant, which have occurred in whole or part due to its own wrongful actions, to effect ejectment. I therefore continue on the premise that if the consent of the Plaintiff was, in this Court’s view, unreasonably withheld or frustrated, it may not rely on those breaches, and indeed the Defendant may be entitled to damages in consequence thereof.

131. What constitutes “unreasonable withholding” has been considered in numerous cases over the years, particularly in relation to the right of a lessee to assign, and in relation to changes of use by the lessee. The Court has repeatedly noted however that it is not possible, nor desirable, to give any exhaustive definition as to what would be in every conceivable case unreasonable withholding (see for example Bates v. Donaldson [1896] 2 QB 241 at 243). As stated by Warrington L.J. in Houlder Bros. & Co. v. Gibbs [1925] Ch. 575 at 584:

“The question whether a particular act is reasonable or unreasonable is obviously one that cannot be determined on abstract considerations. An act must be regarded as reasonable or unreasonable in reference to the circumstances under which it is committed…”

132. In coming to a conclusion on the reasonableness or otherwise of the Plaintiff’s actions the Court must therefore take into account all the circumstances. These might include, where a plaintiff requires its consent is required to some act under the lease, the consideration of questions such as:

“What is the inference to be drawn as to the intention of the parties in inserting in the lease a provision of this kind? What was the danger which the lessor contemplated, and against which the lessee was content to allow the lessor to protect himself?”

133. The reasonableness or otherwise of a person’s refusal to grant consent must be judged at the time when such consent was asked for (Bates v. Donaldson [1896] 2 QB 241 at 244). However if no reason was given at the time for the refusal, this does not affect a lessor’s ability to rely on reasons later tendered in Court; it is for the Court to determine the reasonableness of the grounds stated (Rice v. Lord Mayor of Dublin [1947] I.R. 425 at 435 and 451).

134. Certain matters have been considered to be unreasonable in a technical manner; so that although reasonable from an objective standpoint, they could not be considered reasonable in the context of the relationship between the parties. In Houlder Bros. & Co. v. Gibbs [1925] Ch. 575, the lessor refused to permit the lessee to assign his lease to another on the ground that the assignee was also a tenant of his, and thus should the lease be assigned to him, the lessor would lose good tenants from the adjoining premises, and would have great difficulty re-letting them. The lessor otherwise had no other objection to the assignee. Pollock M.R. noted that such a reason was, however “one which is independent of the relationship between the lessor and lessee”. In those circumstances:

“To hold that such a reason absolved the lessor from the duty of giving his licence to an assignment under the terms of the covenant would, in my opinion, be to give far too wide an interpretation to the word ‘unreasonably,’ and to be going beyond the cases.”

(pp. 583

–

584)

Warrington L.J., in the same case, having reviewed the case law, noted that:

“When you look at the authorities … this, at any rate, is plain, that in the cases in which an objection to an assignment has been upheld as reasonable it has always had some reference either to the personality of the tenant, or to his proposed use of the property.”

(p. 586)

And as put by Sargant L.J.:

“[T]he reason must be something affecting the subject matter of the contract which forms the relationship between the landlord and the tenant, and that it must not be something wholly extraneous and completely dissociated from the subject matter of the contract.”

(p. 587).

135. Nonetheless, concern was expressed with the approach adopted in Houlder Bros. in Viscount Tredgar v. Harwood [1929] A.C. 72. In particular, the circumstances of the landlord should also be taken into account. Thus in that case it was held to be not unreasonable that permission was refused for a tenant to obtain insurance through an insurance agent other than that expressly stated in the lease, as he was a landlord with hundreds of tenants, and thus estate management required that all his tenants have the same insurer. Had all the tenants been allowed to have their own insurers, at their will, it would have made it difficult for the landlord to monitor which tenants had complied with their requirement to obtain insurance.

136. The Supreme Court here considered, per Maguire C.J., in Rice v. Dublin Corporation [1947] I.R. 425 that:

“[W]hile it is the duty of the Court to consider each case upon its merits, there is no reason why a landlord may not properly base a refusal to consent upon grounds of general policy in relation to the management of his estate. The question whether the grounds upon which a decision to refuse consent to the alteration of the user of premises is reasonable in reference to a particular case is a matter for the Court. No general rule can be laid down because it is easy to conceive cases in which a refusal to agree to an alteration of user based on a decision of policy in the management of the landlord’s estate would be entirely reasonable. On the other hand the Court may hold that such a ground is not a reasonable ground for withholding consent in a particular case.”

In that case, however, it was ultimately considered that the refusal was unreasonable. A change of use contrary to covenant had been refused; in particular, the tenant had sought permission to sell alcohol. Davitt J., also in Rice, found that although the Corporation had not acted unreasonably, per se, in refusing such a use, it was clear that it had a policy of so refusing. He thus noted that:

“It is a truism that a policy which is, in itself, sound may yet be enforced by improper means. In enforcing its policy in the way in which it seeks to enforce it in these particular instances the Corporation are in my opinion acting arbitrarily and unreasonably. I think the Corporation has unreasonably refused its consent in these cases.”

137. Estate management was however considered to be a legitimate reason for refusing to permit assignment in O.H.S. Ltd. v. Green Property Co. Ltd. [1986] 1 I.R. 39. In that case the tenant had sought to assign a lease contrary to a covenant that a unit in the Northside Shopping Centre in Dublin could only be used for the purpose of being a “victualler, fruit, fish and vegetable merchants”. He had done so because, although successfully running as such for a period, a supermarket moved into the centre next-door; substantially undercutting the tenant and causing him to close. After being unable to find assignees who might continue the concern as a grocers, he found a building society who was willing to pay for the assignment of the lease. However, the landlord, who was the owner, and it should be noted the builder, of the Shopping Centre refused on the ground that there were enough financial tenants already within the building, and that it would be contrary to the management of the centre to have another, since such were “dead frontages”. The Court found in the circumstances that:

“[T]he landlord’s refusal of its consent is based on valid estate management grounds. Furthermore, even taking into account the special circumstances of the tenant to such extent as they ought to be taken into account, I am satisfied that the landlord’s withhholding of its consent is not unreasonable.”

(p. 44)

138. The onus, ultimately, however must lie upon the party that asserts the unreasonableness of the refusal. As was noted by Lynch J. in the same case:

“In the course of submissions the tenant made the case that it is entitled to the gain to be derived from its commercial venture and that the court should balance the tenant’s position as against the landlord’s position and if this is done that the court should find that the tenant’s need is greater than the landlord’s and that it is unreasonable of the landlord to withhold its consent accordingly. …

However, I do not think that a balancing of the positions of the landlord and tenant is quite the test although the special circumstances of the tenant must be taken into account to some extent. The real question is whether the landlord is unreasonably withholding its consent contrary to the term implied in the covenant restricting user …

The onus is on the tenant to establish that the landlord is unreasonably withholding its consent. Some of the cases would suggest, that in order to do this, the tenant would have to show that the landlord is acting capriciously or arbitrarily but each case must depend upon its own facts. What the tenant has to show in this case is that the landlord is unreasonably withholding its consent to a change of user from a retail outlet as a fruit and vegetable shop to a building society. This involves primarily a consideration of the landlord’s position without, on the other hand, ignoring the tenant’s special circumstances.”

Thus it is clear that the onus lies upon the lessee, but that nonetheless in considering the reasonableness of the lessor’s refusal, the circumstances of the lessee should be borne in mind.

139. To summarise, therefore, it is not possible to outline in the abstract what circumstances will amount to unreasonable withholding of consent, however, in considering whether, in a particular case, such has occurred, account should be taken of all the circumstances of the relationship between the parties, as well as their respective interests. Although there would seem to be some suggestion that for a refusal to be reasonable it must relate directly to the relationship between the parties, and the lease in question, nonetheless where the lessor is involved in the leasing of multiple properties the Court may have cognisance of “estate management” in considering whether a refusal will be reasonable. In this regard, I feel that in O.H.S. v. Green Property Co. Ltd. [1986] 1 I.R. 39, an important consideration was that the lessor had in fact built the shopping centre; this was not a case where the lessee had covenanted to build.

140. In the present case, a number of refusals or decisions by the Plaintiff have been alleged to be unreasonable. These are:

i) The refusal to consent to the removal of dredge material/sand;

ii) The requirements which the Plaintiff sought in respect of the Performance Bond;

iii) The refusal to consent to the proposed Schedule of Works or plans;

iv) The insistence upon the Defendant obtaining planning permission;

v) Questions as to the adequacy of the breakwater as constructed.

141. Before continuing, I should note that the relationship between the parties has clearly been a somewhat fraught one. Both sides have alleged that the other has failed in its obligations, or has caused the project to fail, or otherwise has halted its progress. The Defendant contends that at all times it sought to complete the marina in a timely fashion, but that the unreasonable demands of the Plaintiff frustrated such. On the other hand the Plaintiff claims that persistent breaches of the covenants and conditions in the lease meant that the project could not satisfactorily proceed. In my view, neither party is completely faultless. I accept that the Defendant had internal difficulties which may have delayed its compliance; however this is not the Plaintiff’s fault, and did not ameliorate the obligations owed to the Plaintiff. In addition, even when new investment came on board, the Defendant was stretched to meets its obligations: its method of performance lacked a clear and decisive work programme, a supervisory regime and an implementation. Its intention, I think, was to get the job done, but on a minimalist scale. On the other hand, it is clear from correspondence that the positive assistance expected of and from the Plaintiff ceased, and this assistance itself declined and also ceased (in fact it becoming negative). Further the Plaintiff at times put in place barriers to the completion or continuance of the project, and it took an approach to its dealings with the Defendant which, on one reading, was obstructionist, or at the very least unhelpful. Nonetheless, as stated, I believe there was fault on both sides. I shall therefore continue by considering each complaint individually.

142. Dealing firstly with the refusal to consent to the removal of sand. Having reviewed the correspondence, I have concluded that ultimately consent in this regard was unreasonably withheld. The relevant clause of the lease, clause 10, states that the lessee shall obtain prior written consent for the excavation, removal and stockpiling of material, and that it shall be for the lessor to specify the terms and conditions of such. The Plaintiff took a somewhat peculiar position in relation to this. Whilst steadfastly holding to a requirement that prior written consent was required for the exact method and placement of the dredge material, it stated that it was for the lessee to find a site which was suitable to the lessor. The only suggestion forthcoming from the lessor in this regard was to dispose of the material on a nearby golf course. This was unacceptable to the Defendant since it was clear that the golf course was not willing to pay even the transport costs of such. On the other hand, the Defendant put forward several suggestions which would have allowed it to sell the sand, which it was later accepted was of a high quality, with a low silt content; ideal for construction purposes. It is clear that there was significant confusion on the part of the Plaintiff as to both the status of the sand, in that they appear to have regarded it as waste for the purposes of transportation and storage, and as to who required what certificates in relation to its transportation and acceptance, and from which body (the EPA, or Donegal County Council) such should be obtained from. Although it now appears that at least one remover did in fact have such permits, but the Defendant did not inform the Department of this fact.

143. It seems to me that it is unreasonable to request the Defendant to provide waste licences for transportation. If such was required it would be a matter for the carrier. From my understanding it would not be required by the Defendant, nor, in circumstances where the sand was being utilised in construction, would the recipient of such sand require a waste licence. It is not a matter for the Plaintiff to enforce the relevant licences. It was not the regulatory agent: it was a contractual lessor. It should therefore have been sufficient for the Defendant to undertake to obtain relevant licences, should such have been needed by it, which is unclear, and that any person transporting such material would be suitably licenced to so do. If non-compliance was at issue, it was for others, but not the Plaintiff, to enforce. The proposed sites put forward by the Defendant should have been sufficient for the Plaintiff. Additionally, as stated, the one site put forward by the Plaintiff was wholly unreasonable from the Defendant’s point of view. In these regards I am therefore satisfied that the Plaintiff unreasonably withheld its consent with regards to the removal of the dredge material from the marina to a site identified by the Defendant. Their refusal in this regard continued for years, and I remain unsure why this matter was not more expeditiously dealt with.

144. The consequence of this is that the refusal of consent by the Plaintiff to allow the removal of sand, and its course of dealing with the Defendant in relation thereto, was unreasonable, and the Defendant is entitled to such damages as are appropriate in the circumstances and resultant thereon.

145. The next issue is the performance bond. There is no doubt that the Defendant was required under the lease (clause 12) to obtain a Bond from an Insurance Office of repute in the sum of IRŁ250,000 for the restoration of the property, if the lessor so required. It should be noted that this is not a compulsory clause. It forms part of the lessee’s obligation to restore the site to its former condition in the event of premature termination or abandonment. The dealings between the parties in this regard should therefore be viewed in this light.

146. I would firstly note that looking specifically at clause 12 it strikes me that the Bond envisaged in the lease and that later requested, and referred to as a Performance Bond, are not one and the same thing. Reading clause 12 it is clear that the Bond envisaged is to “restore the foreshore to its former condition”, in the event of “unsatisfactory completion or abandonment”; what might be termed a “remedial” or “restorative” Bond. This is a Bond of an entirely different nature to that later insisted upon by the Plaintiff, which was a Performance Bond for the completion of the works. These are therefore two wholly different requirements; one is to remove unfinished or poorly built structures and restore the foreshore to its prior condition, whereas the other is to complete the structure in the event of a failure by the Defendant to properly so construct. Clearly the type of insurance, and indeed the scale of such, will vary incredibly. Indeed as was noted in the aforementioned note of the 6th March 2003, “it was unlikely that the Bond would cover more than a fraction of the remaining costs”. Such would seem logical. It has been noted that the Defendant has already spent well in excess of €3 million on the project, with at least another €3 million required for completion. A Bond of IRŁ250,000 (€317,434.52) would therefore not even scratch completion, but it might be sufficient for removal. It would therefore be my opinion, upon a literal reading of clause 12, that the Defendant is not in breach of covenant in this regard; the Plaintiff only being entitled to a Bond for the restoration of the site, not for its completion.

147. However, the requirement was modified by the correspondence of the 19th May 2000 in which the Defendant agreed to provide a “performance bond of suitable duration and which specifies the cover of all works set out in the Schedule of Works to be agreed.” Relative to this type of bond one must consider the requirements which the Department put in place for the terms of such a Bond, some of which were later abandoned; these were:

i) A Schedule of Works, upon which the Bond would be based, and a demonstration that the Defendant was in a position both financially and technically to complete the works;

ii) Payment on demand; and,

iii) No recourse to arbitration in the event of a call for payment.

148. In relation to the latter two, evidence was presented that would seem to suggest that both of these requirements were not such as would ordinarily be included in a Bond. In this regard, parallels could be seen with cases dealing with certain requirements in insurance contracts where it was shown that it would not ordinarily be possible to obtain insurance on the terms sought by the landlord. For example in Upjohn v. Hitchens [1918] K.B. 171 the Court interpreted a covenant to insure against loss or fire, as not to include cover against loss or damage by fire occasioned by enemy aircraft. The insurance companies had never before insured against such, and had in fact generally exempted such from policies. It was therefore not a breach of covenant for the lessee not to have obtained such cover. The insurance envisaged in the covenant was such as would ordinarily be obtainable at the time of the lease, or such as was later agreed between the parties; the covenant could not be held to be a requirement of unconditional insurance, where such would be virtually unobtainable form any insurer. In those circumstances the requirement could not be held to be reasonable, especially in circumstances where the insurance obtained by the lessee in the past had not covered such circumstances, and there had been no complaint from the lessor in relation thereto. As stated by Roche J.:

“The covenant, in my judgment, is to effect such a policy as is the usual policy of the companies in question at the date of the lease, or such a policy as may from time to time be usual during the currency of the lease.” (pp. 178 – 179)

149. By analogy, I am of the opinion, as has been suggested by the Defendant, that it would have been impossible for it to obtain a Bond which was both payable on demand and which, in the event of a claim, would not have been referable to arbitration. As stated in the letter of the 18th June 2003, this was “a condition that no underwriter in the country was willing to agree to.” Indeed, it would appear that the Department dropped these requirements in May / June 2003. Although the Department was entitled to request a Bond to cover matters within the scope of the obligation above-quoted, on terms which were acceptable to it, it must be implied that they could not make continued requests for a Bond which was impossible to obtain. Their insistence on requirements (ii) and (iii) was therefore unreasonable.

150. That is not to say that the Department is not entitled to a Bond. It is entitled to the type of Bond agreed upon, and the Defendant must provide such, if still required by the Plaintiff. I would therefore direct that the Defendant provide a Bond in the sum of IRŁ250,000 (€317,434.52), if so required by the Plaintiff, of suitable duration and which specifies the cover of all other works set out in the Schedule of Works to be agreed. The general terms of such a Bond are to reflect existing commercial construction norms.

151. The next issue between the parties, is that relating to the provision of a Schedule of Works. In the lease there are a number of requirements relative to this matter: Covenant 3 requires the marina to be constructed in accordance with the terms and conditions of the Second Schedule; paragraph 3 of the Second Schedule states that such must conform with the plans and drawings to be submitted and approved; paragraph 4(iv) of the Second Schedule states that no work on the breakwater shall commence until the lessor approves the plans and drawings; and, paragraph 5 of the Second Schedule provides that the technical specifications of the proposed works must be approved by the Plaintiff. In the events which occurred, the Defendant gave an undertaking on the 6th May 1998 not to recommence works pending the submission and acceptance of agreed plans. According to Michael Galbraith, the architect for the project appointed by the John McDaid of Figary, following a meeting on site with Department engineers, John McHale and Paul O’Sullivan, it was agreed that full detailed drawings were to be provided by the 6th November 1998. Such drawings were submitted to the Department on that date.

152. In any event and notwithstanding what Michael Galbraith says it is clear that no plans were provided, in any form, to the Department for a protracted period, and the Defendant would appear to have recommenced works, despite its undertaking to halt such. In March 2000, Arup were appointed as marine engineers to the project, and by mid-2000 detailed drawings were sent to the Department for approval. However, the Department refused final approval until the outstanding matters of the Bond and quantities of material were complied with. The latter condition was not ultimately satisfied with until August 2005.

153. Throughout correspondence the Schedule of Works was often linked to the request for a Performance Bond. It was noted that no such Bond could be obtained until a detailed Schedule of Works was provided; this is understandable given the nature of such a Bond. Although I have found that the insistence upon a Performance Bond was unreasonable in the circumstances, the insistence upon a properly detailed Schedule of Works is not so. The lease expressly, or implicitly, is clear in this regard: prior to the commencement of works the approval of the Plaintiff is required for such works. This was not done, and such continued to go unfurnished for many years despite persistent calls on behalf of the Department. Nonetheless the Defendant continued to construct the marina following the receipt of consent from the Department, on foot of an undertaking given by the Defendant, on or around the 19th May 2000. I would therefore find that approval for such a Schedule was not unreasonably withheld, and indeed the Defendant was in fact in breach of covenant, in this regard.

154. The next issue is that of planning permission. It is clear that where development takes place below the high watermark, no planning permission is required; the relevant authority being the Department of the Marine from whom a foreshore lease is obtained. Both parties would seem to accept this, and such would appear to be common knowledge. It is therefore surprising to find repeated requests by the Department for the furnishing of planning permission in relation to the development. When challenged by the Defendant in correspondence, the Department does two things. Firstly it states that what it is requesting is the planning permission for any development above the high watermark, and secondly nonetheless it seeks a letter of confirmation from Donegal County Council that in fact no planning permission is required for the development below the high watermark. Nonetheless, it would seem from correspondence that the Defendant confirmed that it would obtain planning permission in respect of any parts of the development which so required. In any event, I do not feel that this was a major causative factor in the case herein, and I do not believe that any great reliance could be placed on this provision by either party. It was undoubtedly a condition of the lease that the lessee obtain and comply with planning permission in relation to the site where necessary. I have considered the Planning Report of Tom Phillips and Associates, prepared on behalf of the Defendant. In his opinion the marina is in full compliance with all relevant planning laws.

155. Similarly, with regards to the construction of the breakwaters, it would appear that initially there were concerns at the manner in which they were being constructed, and the fact that they would appear to have constituted a marine hazard. However, it would seem that IGS was satisfied, as far back as July 1998, that the breakwaters were constructed in a proper and safe manner. Nonetheless, as with the Schedule of Works, it would not appear that the Defendant supplied sufficiently detailed drawings, plans and technical specifications in relation to the breakwaters for some time. In that regard they were in breach of covenant, although, as stated, there was in fact no issue with the quality or safety of the breakwaters.

156. To summarise, therefore, in relation to the alleged unreasonableness of certain refusals/decisions by the Plaintiff, I have concluded that the refusal of the Plaintiff to consent to the removal of the dredge material, by the imposition of conditions and the insistence upon certain unnecessary licences, was unreasonable. So too was the insistence upon a Performance Bond; on the terms and conditions so laid down. However, the failure of the Defendant to provide sufficiently detailed plans, drawings, Schedule of Works and Quantities, for a significant period of time was in breach of covenant, and the Department’s complaints in this regard were not unreasonable. Neither the requirements as to planning permission, nor the quality of the breakwaters could be said to be major contributory factors in the delays caused herein, or to the overall dispute between the parties; this notwithstanding my comments in relation to compliance with those covenants relating thereto.

Trespass:
157. The Plaintiff alleges that, as built, or potentially completed, parts of the constructed marina extend beyond the lease boundaries. The only substantial evidence given in this regard was that of Mr. Paul O’Sullivan, Department Engineer. In response, the Defendant admits some encroachment on the south west and southern breakwater, but assigns both a de minimis description. Further, it claims that the trespass issue must be referenced to the Ove Arup Drawing of May 2000, which the Plaintiff accepted, rather than the lease map. In addition it relies on site inspections by officials of the Plaintiff who raised no objection to the structure as existing. I reject both submissions: whilst the Plaintiff accepted the drawing, it did so from a technical/engineering perspective and not a land/boundary perspective. Equally so with those who carried out technical inspection. Therefore, in principle, whatever about the precise areas/measurements, I accept the evidence of Mr. O’Sullivan. There has, therefore, been a breach of covenant, and a technical trespass, in this regard.

158. In the event of such a finding the Plaintiff says that “it is open to the Court to deal with the matter in the overall context of a determination of the issues between the parties”. I propose to adopt that approach. Therefore, in tandem with the lease, the Defendant should obtain similar title to the encroached lands. The consideration therefor should be agreed, or, in default of agreement, determined by this Court.

Loss of Chance – The Interreg IIIA Grant:
159. In its counterclaim, the Defendant has admitted that as a matter of law, proof of an ultra vires act will not in itself be sufficient to ground an action for breach of statutory duty. It must be actionable in the sense that the Defendant comes within a class of persons contemplated by the legislative scheme as having an actionable claim in damages in the event of a breach. If the breach is actionable, damages will be recoverable on the ordinary rules of tort including those of remoteness and foreseeability (Glencar). In the alternative, even if the breach is not actionable per se, it is claimed that the actions or statements of the Plaintiff were negligent, and in the circumstances it is just and reasonable to impose a duty of care on the Plaintiff; there being no reasons of public policy or otherwise not to impose such duty (Siney v. Dublin Corporation [1980] I.R. 400 (“Siney”); Glencar; Kennedy v. Law Society [2004] 1 I.L.R.M. 178; Beatty v. Rent Tribunal [2005] I.E.S.C. 661; Wildgust v. Bank of Ireland [2006] 1 IR 570). Furthermore, the Defendant relies on the European dimension of the duty imposed (Emerald Meats Ltd v. Minister for Agriculture and Food [1997] 2 I.L.R.M. 275 (“Emerald Meats”)).

160. In reply, the Plaintiff contends that the Defendant has failed to properly identify the statutory duty which it is alleged to have breached; the only duty the Defendant can point to is Article 34 of Council Regulation EC No. 1260/1999, which lays down general provisions on Structural Funds and which makes provision, inter alia, for the responsibilities of managing authorities involved in implementing the objectives of the Regulation. This Regulation cannot give rise to an enforceable statutory duty which supports a claim in damages. Even if the Defendant could show that the Plaintiff has acted in any way ultra vires, this of itself will not provide a basis for damages. No case of abuse of Public Office or any mala fides on the part of the Plaintiff in the discharge of its functions has been made or pleaded. Statutory entities will not be held liable for the honest and bona fides discharge of their legal duties; this principle is essential to a fair and effective system of governance (Pine Valley; Kennedy v. Law Society (No.4) [2005] 3 IR 228 (“Kennedy”); Hayes v. Minister for Finance [2007] IESC 8 (“Hayes”)).

The Amount of the Grant Application:-

161. Before continuing to consider further the issue of the Interreg grant, there is one issue of fact which should first be dealt with. The Plaintiff, in its submissions, now alleges that the €2.46 million is inclusive of a top up from the State of €630,000, rather than in addition to it. This is a novel assertion, not put before any witness. Having reviewed the extensive correspondence in relation to same, and the transcripts of the hearing, the uncontroverted evidence, of Mr. McKinney and Ms. Doherty, is that the amount was in addition to the €2.46 million. Ms. Doherty expressly stated this in her evidence (Day 7, 27th March 2009, p. 84 of the transcript):

“Q. I think the grant you were seeking was a grant for €2.3 million and there would be a top up, I think, from the State of some €630,000; is that right?

A. I think that our application was for €2.4 million and the top up was on top of that.”

No alternative evidence has been pointed to by the Plaintiff in this regard. Indeed, in a letter from Pat Colgan to the European Commission dated the 13th February 2008, the SEUPB noted that “the Department would also have had to commit public money (in this case in excess of €630,000 of departmental voted expenditure and over €2.3 million of programme expenditure”. However, I was not directed to this statement by the Defendant and have observed it only in the course of other considerations. It could not be the case that the €2.3 or €2.4 million was inclusive of the €630,000 from the department. Were this the case, the amount of money due from the Scheme would have been in the region of €1.6 – €1.7 million; nowhere is such a figure referred to as being the contribution from the Scheme. In light of the above I therefore proceed on the assumption that the grant applied for was for €2.46 million with an additional top up from the Department of €630,000.

Liability of the Department – Breach of Statutory Duty:-

162. Finlay C.J. in Pine Valley at p. 36 adopted with approval the “clear summary” of Wade (Administrative Law (5th Ed) (1982)):

“The present position seems to be that administrative action which is ultra views but not actionable merely as a breach of duty will found an action for damages in any of the following situations:

1. If it involves the commission of a recognised tort, such as trespass, false imprisonment or negligence.

2. If it is actuated by malice, eg personal spite or a desire to injure for improper reasons.

3. If the authority knows that it does not possess the power which it purports to exercise.” (Emphasis added)

This passage was also quoted, inter alia, by Costello J. in O’Donnell v. Dun Laoghaire Corporation [1991] I.L.R.M. 301 at 320, and noted by Keane C.J. and Kelly J. in Glencar (see paras. 164 et seq. infra.). In Pine Valley the Minister, acting on the advice of his officials, had granted outline planning permission in relation to property later acquired by the plaintiffs therein. It subsequently transpired that this permission was ultra views, since the developer in that case had materially contravened the development plan. This resulted in financial loss to the plaintiffs, which they sought to recovery from the Minister by way of damages for misfeasance of public office, negligence and negligent misrepresentation. No allegation of mala fides was made against the Minister. Both the High Court, per McMahon J., and the Supreme Court refused the reliefs sought, since the minister had acted on the advice of a senior legal adviser of his Department, and because it was “obvious” that the Minister had believed the planning permission to be valid.

163. Henchy J., in Pine Valley sated:

“Breach of statutory duty may occur in a variety of circumstances and with a variety of legal consequences. Here we are concerned only with a breach of statutory duty in the making of a decision which has been committed by statute to the decision-maker. The weight of judicial opinion as stated in the decided cases suggests that the law as to a right to damages in such a case is as follows. Where there has been a delegation by statute to a designated person of a power to make decisions affecting others, unless the statute provides otherwise, an action for damages at the instance of a person adversely affected by an ultra vires decision does not lie against the decision-maker unless he acted negligently, or with malice (in the sense of spite, ill-will or suchlike improper motive), or in the knowledge that the decision would be in excess of the authorised power: see, for example, Dunlop v. Woollahra Municipal Council [1982] AC 158; Bourgoin S.A. v. Ministry of Agriculture [1986] Q.B. 716. While the law as I have stated it may be lacking in comprehensiveness I believe it reflects, in accordance with the requirements of public policy, the limits of personal liability within which persons or bodies to whom the performance of such decisional functions are delegated are to carry out their duties.”

(p. 40)

164. Reliance was placed by the Defendant on the decisions of the Court in Glencar. In that case the respondent Council had, in a Development Plan, put in place a mining ban, notwithstanding contrary recommendations received from the Minister for Energy. The High Court, in a judgment given by Blaney J. in Glencar Explorations plc. v. Mayo County Council [1993] 2 I.R. 237, determined that the mining ban was ultra vires the powers of the Council, and was null and void. Having succeeded in having the ban set aside, the applicants, who had been the holders of mining licences in the area, sought damages, on foot of the findings of Blaney J., from the Council for misfeasance in public office, breach of statutory duty, negligence, breach of legitimate expectations and wrongful interference with their constitutional rights. The applicants claimed recovery of all the monies they had expended prior to the imposition of the ban. For our purposes, it should of course be noted that no claims of misfeasance in public office or wrongful interference with constitutional rights is claimed.

165. Kelly J. in the High Court in Glencar, echoing the words of Finlay C.J. in Pine Valley, noted that:

“The effect of [Blaney J.’s] judgment was to make void ab initio the offending provision. But it does not follow automatically that because a declaration of invalidity has been given that that of itself gives rise to a cause of action in damages. There is no direct relationship between the power of the High Court to quash a decision of an inferior tribunal or body and a liability being visited on the respondent in such a situation to pay damages.”

As in that case, the Defendant herein would seem to accept that an entitlement to damages does not arise by reason alone that the Plaintiff has engaged in acts which could be described as ultra vires.

166. In order for a statutory duty to be actionable it is clear that the provision(s) relied upon must have been created for the protection or benefit of a specific person, or class of persons, rather than the public at large. Kelly J. in Glencar (pp. 99-100) stated, citing the decision of Finlay C.J. in Pine Valley:

“As far as s. 19 of the Act of 1963 is concerned, I am of the opinion that it creates a duty in favour of the general public to devise a plan. Nowhere do I find, either expressly or by implication, that it creates any duty which the legislature intended to be enforceable by an individual in a claim for damages. The duties imposed are ones which fall to be discharged towards the public. The dictum of Finlay C.J. in Pine Valley Developments v. The Minister for Environment [1987] I.R. 23 at p. 36, is in my view wholly relevant to this case. He said:-

‘The Minister in making his purported decision to grant an outline planning permission was exercising a decision-making power vested in him for the discharge of a public purpose or duty. The statutory duty thus arising must, however, in law, be clearly distinguished from duties imposed by statute on persons or bodies for the specific protection of the rights of individuals which are deemed to be absolute and breach of which may lead to an action for damages.’

In other words, if the duty is owed to the public at large then no action for breach of duty lies.”

(Emphasis added)

167. In the Supreme Court, Keane C.J., with regards to the duty of the Council, noted:

“The decision by the respondent to include the mining ban constituted the purported exercise by it of a power vested in it by law for the benefit of the public in general. It was not the fulfilment by it of a duty imposed by statute for the specific protection of particular categories of persons, the breach of which may lead to an action for damages.”

([2002] 1 IR 84 at 127)

Keane C.J., having noted the passage cited by Finlay C.J. in Pine Valley from Wade, Administrative Law (5th Ed) (1982), noted that although it was undoubtedly the case that in certain circumstances an ultra vires act could be actionable as a breach of duty, this would only arise:

“where … the statutory duty in question is imposed on the body concerned for the specific protection of the rights of individuals.”

168. The tort of misfeasance in pubic office, or put another way the liability of a public body for ultra vires actions, was summarised by Fennelly J. in Glencar thus at pp. 148-149 of the report:

“[T]he nature of the tort of misfeasance in public office emphasises that lack of vires is insufficient on its own to ground a cause of action sounding in damages. Keane J., observed in his judgment in McDonnell v. Ireland [1998] 1 I.R. 134 at p. 156, that that ‘tort is only committed where the act in question is performed either maliciously or with actual knowledge that it is committed without jurisdiction and with the known consequence that it would injure the plaintiff …’. The common characteristics of those two alternative elements of that rare and unusual civil wrong are, as explained by Clarke J. in Three Rivers DC v. Bank of England (No. 3) [1996] 3 All E.R. 558 at p. 632, in a passage cited by the trial judge as being that the tort ‘is concerned with a deliberate and dishonest wrongful abuse of the powers given to a public officer.’ … [T]he conditions demanded by the law for success in invoking [the tort] explain the policy of the law that public authorities should not be at risk of claims for damages if they exercise their powers bona fide.”

Having quoted Henchy J. from Pine Valley (see para. 163 supra.), and concurring therein, he noted that he would add one thing:

“[T]he absence of the right to automatic compensation for loss caused by an ultra vires decision can find further justification from the protection of individual rights afforded by the existence of the remedy of judicial review. While the sufferer of loss from a lawful but non-tortious private act is entirely without a remedy, a similarly positioned victim of an ultra vires act of a public authority, by way of contrast, has at his disposal the increasingly powerful weapon of judicial review. Thus, he may be able to secure, as in this case, an order annulling the offending act. In appropriate cases, a court may be able to grant an interlocutory injunction against its continued operation.”

Similarly, the importance of judicial review remedies in the context of not granting damages against the mistaken exercise of powers by a Minister, or other public bodies, was noted in the Privy Council case of Rowling v. Takaro Properties Ltd [1988] AC 473 (cited with approval by Fennelly J. in Glencar).

169. I would immediately note that in the present case, although it would seem to be accepted that the Department acted wholly ultra vires, judicial review of that decision would, at this time, afford no comfort to the Defendant herein. This Court cannot remedy through injunction or declaration the damage which the refusal to send forward the application to the Steering Committee is alleged to have caused.

170. Furthermore in the present case, leaving aside the question of whether the provisions and duties in question could be considered as “statutory” for this purpose, it is clear that they are not of a public nature. They do not impose duties or powers in relation to the public at large, but instead are directed at a very focussed group; namely those making applications under the Interreg IIIA Scheme. This is, by all accounts, a very narrow and defined group. This can be contrasted very sharply with the duties considered in both Pine Valley (planning decisions) and Glencar (development plans). There were no wider considerations in the public interest to be taken account, nor was any duty owed by the Department to the public in the discharge of its duties under the Scheme; their duty was owed only to those applying for a grant thereunder.

171. Keane C.J. in Glencar suggests, albeit obiter, that the decision of the Court of Justice in Francovich v. Italy (Case C-6/90 & C-9/90) [1991] ECR I-5357:

“[W]as to the effect that an action for damages would lie against a public authority in a member state which had acted in breach of European Community Law where damage had been sustained as a result.”

Fennelly J. too considered Francovich, noting that:

“The first condition enunciated by the Court of Justice is that the Community act which is invoked - in that case a directive – ‘should entail the grant of rights to individuals’ (para. 40 of the judgment). A duty imposed by statute on a public body will not be held to create a right to damages for its breach unless it can be shown to have within the scope of its intendment a reasonably identifiable protective purpose and identifiable class intended to benefit.”

In the circumstances of that case, Fennelly J. thus felt that there was in fact no question of a breach of the statutory duty identified (being to create a development plan), and indeed that was not the duty identified to have been breached.

172. As stated, the above considerations, up to this point, have not considered whether or not the Interreg Scheme could be said to impose “statutory duties”. The Department has urged that the system is not based on any statute, and is in fact an ad hoc arrangement, which is not of a sufficient nature to give rise to “direct effect”, so as to be enforced against it. In those circumstances a breach of the Scheme, should such be found, cannot be said to be a breach of a statutory duty.

173. In Emerald Meats the Court considered, inter alia, whether the decision of the Minister not to forward an application of the plaintiff for an import licence to the Community, for a decision under Council Regulation 3889/89/EEC and Commission Regulation 4024/89/EEC, which was found to be incorrect in law, could give rise to damages for breach of statutory duty. I need not detail the Court’s findings in relation to the interpretation of the Regulations, except to note that the Court found that the Minister had been wrong, as a matter of law, not to forward the application; the Minister had, in the circumstances, a duty to forward such application.

174. Having so found, Blayney J. stated:

“On behalf of Emerald Mr. Fennelly [now Judge of the Supreme Court] submitted that its claim to damages, arising by reason of the breach by the Department of Agriculture of its obligations under Regulation 4024/89, derives from the provisions of Article 189 of the EEC Treaty, the direct effect of the Regulation and the case law of the European Court of Justice. Mr. Fennelly relied in particular on Francovich v. Italy (Cases C-6/90 and C-9/90) [1991] ECR I-5357 and he cited passages from the judgment of the court in support of his submission. In my opinion Mr. Fennelly’s submission is correct. This is not an action against the Community. It is an action against a Member State. The European Community cases referred to by Mr. O'Reilly [Mulder v. Council of the European Communities (Case C-104-89 and C-37/90) [1992] I-E.C.R. 3061] are accordingly not applicable. And Pine Valley Developments Ltd. v. Minister for the Environment [1987] I.R. 23 is distinguishable. What was in issue there was whether damages were recoverable in respect of damage resulting from an ultra vires planning decision made by the Minister for the Environment. The action was not for a breach of statutory duty which is in effect the present case.”

He cited with approval paragraphs 31-37 of the decision of the Court of Justice in Francovich, which state:

“31. It should be borne in mind at the outset that the EEC Treaty has created its own legal system, which is integrated into the legal systems of the Member States and which their courts are bound to apply. The subjects of that legal system are not only the Member States but also their nationals. Just as it imposes burdens on individuals, Community law is also intended to give rise to rights which become part of their legal patrimony. Those rights arise not only where they are expressly granted by the Treaty but also by virtue of obligations which the Treaty imposes in a clearly defined manner both on individuals and on the Member States and the Community institutions (see the judgments in Case 26/62 Van Gend en Loos [1963] ECR 1 and Case 6/64 Costa v. ENEL [1964] ECR 585).

32. Furthermore, it has been consistently held that the national courts whose task it is to apply the provisions of Community law in areas within their jurisdiction must ensure that those rules take full effect and must protect the rights which they confer on individuals (see in particular the judgments in Case 106/77 Amministrazione delle Finanze dello Stato v. Simmenthal [1978] ECR 629, para. 16, and Case C-213/89 Factortame [1990] ECR I-2433, paragraph 19).

33. The full effectiveness of Community rules would be impaired and the protection of the rights which they grant would be weakened if individuals were unable to obtain redress when their rights are infringed by a breach of Community law for which a Member State can be held responsible.

34. The possibility of obtaining redress from the Member State is particularly indispensable where, as in this case, the full effectiveness of Community rules is subject to prior action on the part of the State and where, consequently, in the absence of such action individuals cannot enforce before the national courts the rights granted to them by Community law.

35. It follows that the principle whereby a State must be liable for loss and damage caused to individuals as a result of breaches of Community law for which the State can be held responsible is inherent in the system of the Treaty.

36. A further basis for the obligation of Member States to make good such loss and damage is to be found in Article 5 of the Treaty, under which the Member States are required to take all appropriate measures, whether general or particular, to ensure fulfilment of their obligations under Community law. Among these is the obligation to nullify the unlawful consequences of a breach of Community law (see, in relation to the analogous provision of Article 86 ECSC, the judgment in Case 6/60 Humblet v. Belgium [1960] ECR 559).

37. It follows from all the foregoing that it is a principle of Community law that the Member States are obliged to make good loss and damage caused to individuals by breaches of Community law for which they can be held responsible.”

175. From the above it is therefore clear that where obligations are placed on a Member State, or an organ thereof, the Courts of that Member State must ensure that those obligations are enforceable. It is a principle of Union law that where an organ of the State can be held responsible for loss or damage caused by a breach of those obligations that the affected individual must be able to recover damages therefor.

176. One other issue which arose in Emerald Meats was whether the plaintiff was entitled to both general and special damages. The trial judge had held that the plaintiff was only entitled to recover special damages, however, Blayney J. in the Supreme Court, rejected this proposition:

“Since ‘general damage’ is damage which the law implies in every infringement of an absolute right, and special damage means particular damage beyond general damage, it is difficult to see how the Minister could be liable for the former and not for the latter. Furthermore, since both are equally caused by the wrongful act, there is no reason why the Minister should not be liable for both. I would adopt as a correct statement of the law the following passage from Hogan and Morgan on Administrative Law (2nd Ed.) at p. 634:—

‘As a general proposition, it is true to say that neither the State nor any other public authority enjoys any special position in the law of torts. The general law — trespass, negligence, nuisance, breach of statutory duty etc. — applies in substantially the same way as to a private person.’

I am satisfied in the circumstances that Emerald is entitled to general damages, in addition to the special damages already awarded to it …”

It is therefore clear that if the Plaintiff herein is liable for damages in respect of the failure to forward the Interreg application it will be liable for both general and special damages.

177. Having regard to the foregoing, in summary I am satisfied that:

i) A breach of statutory duty will be actionable where the duty is intended to protect or benefit a particular individual or confined group of individuals, subject to the remoteness and foreseeability of the damage inflicted;

ii) If the duty imposed is one which is imposed for the benefit of the public, the breach is not actionable unless:-

a) it involves the commission of a recognised tort,

b) it is actuated by malice,

c) the authority knew it did not possess the power it purported to exercise;

iii) Breach of a duty under European law will give rise to an action for damages as if it were a breach of statutory duty;

iv) Damages for breach of duty under European law will give rise to both general and special damages.

178. Having regard to the foregoing, and having considered the Interreg Scheme as a whole, it is clear to me that it placed obligations upon the Department to convey applications to the Steering Committee, and assist in their processing. I would not second guess the comments of the Commission in this regard; it is clear that in refusing to forward the Defendant’s application to the Steering Committee the Department was illegally usurping the Steering Committee’s position. There is thus no question but that the Department acted in an ultra vires manner. The duties under the Scheme were expressly directed towards the applicants of that Scheme, of which the Defendant was one. This duty could not be said to be of a public nature and in that regard both Glencar and Pine Valley are different on their facts. I have considered the other authorities put forward by the Plaintiff in this regard (Kennedy; Hayes) and consider both of those cases also equally distinguishable on the facts; the former relating to duties under an investigation procedure, and the latter in relation to the liability of gardaí when enforcing the law. Although I would note that I agree with the statement of law and the conclusions of all of the aforementioned cases, they are entirely distinguishable in the circumstances.

179. I am therefore satisfied that the duty in question was one which was owed directly to the Defendant, and that it was entirely foreseeable that in failing to forward its application to the Steering Committee, loss of chance would be suffered by the Defendant. I would therefore find that the Defendant is entitled to damages as a breach of statutory duty. I shall consider the extent to which the fact that the breach resulted in a loss of chance, rather than a direct loss, affects the recovery of such damages at para. 190 infra.

Liability of the Department – Negligence:-

180. Despite my findings in relation to the above, I shall nonetheless consider, although admittedly obiter, whether the Plaintiff was negligent in the handling of the Defendant’s application.

181. As stated in relation to breach of statutory duty, the mere finding that a respondent has acted ultra vires will not ground a claim in damages. As Finlay C.J. in (p. 38) stated:

“I am satisfied that it would be reasonable to regard as a requirement of the common good an immunity to persons in whom are vested statutory powers of decision from claims for compensation where they act bona fide and without negligence. Such an immunity would contribute to the efficient and decisive exercise of such statutory powers and would, it seems to me, tend to avoid indecisiveness and delay, which might otherwise be involved.”

However, as was noted by Kelly J. in Glencar (at p. 101):

“That statement, of course, does not exclude an entitlement to recover damages in circumstances where the impugned act was carried out negligently.”

182. However, an action for damages can only succeed where the negligent action was committed in the context of a relationship involving a duty of care. The leading case in this regard is Ward v. McMaster [1985] I.R. 29 (High Court) and [1988] I.R. 337 (Supreme Court). In the High Court, Costello J., having reviewed the relevant authorities, came to the following conclusions which he summarised at pages 49 and 50 of the report:

“(a) When deciding whether a local authority exercising statutory functions is under a common law duty of care the court must firstly ascertain whether a relationship of proximity existed between the parties such that in the reasonable contemplation of the authority carelessness on their part might cause loss. But all the circumstances of the case must in addition be considered, including the statutory provisions under which the authority is acting. Of particular significance in this connection is the purpose for which the statutory powers were conferred and whether or not the plaintiff is in the class of persons which the statute was designed to assist.

(b) It is material in all cases for the court in reaching its decision on the existence and scope of the alleged duty to consider whether it is just and reasonable that a common law duty of care as alleged should in all the circumstances exist.”

183. On appeal, the Supreme Court upheld the conclusions of Costello J. Having found that the local authority were in breach of public duty, Henchy J. stated:

“However, the breach of such a public duty would not in itself give a cause of action in negligence to the plaintiff; see Siney v. Corporation of Dublin [1980] I.R. 400. It is necessary for him to show that the relationship between him and the Council was one of proximity or neighbourhood which cast a duty on the Council to ensure that, regardless of anything left undone by the plaintiff, he would not end up as the mortgagor of a house which was not a good security for the amount of the loan. A paternalistic or protective duty of that kind would not normally be imposed on a mortgagee in favour of a mortgagor, but the plaintiff was in a special position.”

McCarthy J. indicated that whilst Costello J. had rested his conclusion on the “fair and reasonable test”, he saw the duty as arising from:

“The proximity of the parties, the foreseeability of the damage, and the absence of any compelling exemption based on public policy”.

In his opinion:

“The proximity of the parties is clear. … This Act imposed a statutory duty upon the County Council and it was in the carrying out of that statutory duty that the alleged negligence took place. It is a simple application of the principle in Donoghue v. Stevenson [1932] AC 562 confirmed in Anns v. Merton London Borough [1978] AC 728 and implicit in Siney v. Corporation of Dublin [1980] I.R. 400 that the relationship between the first plaintiff and the County Council created a duty to take reasonable care arising from the public duty of the County Council under the statute. The statute did not create a private duty but such arose from the relationship between the parties.”

Thus even where the statutory duty of the public body is of a public nature, such as would be required for breach of statutory duty (paras. 162-179 supra.), the relationship of the plaintiff with the authority may be of such proximity as to create a specific private duty, and, where the damage in question was foreseeable, it may be actionable in negligence. However, even if the public body can be found to owe a plaintiff a duty of care, and the relationship was such that it could be relied upon to ground a claim in damages for negligence, nonetheless the Court must consider whether there are compelling reasons of public policy why damages should not be granted in the particular circumstances of the case.

184. Considering the above decision, and having extensively reviewed the law in relation to negligence (in particular the English cases of: Donoghue v. Stevenson [1932] AC 562; Anns v. Merton London Borough [1978] AC 728; Junior Books Ltd. v. Veitchi Co. Ltd [1983] 1 AC 520; Caparo plc. v. Dickman [1990] 2 AC 605; Stovin v. Wise [1996] AC 923), both simpliciter and in relation to acts of public bodies, Keane C.J. in Glencar came to the conclusion that:

“[T]he mere fact that the exercise of a power by a public authority may confer a benefit on a person of which he would otherwise be deprived does not of itself give rise to a duty of care at common law. The facts of a particular case, however, when analysed, may point to the reasonable foreseeability of damage arising from the non-exercise of the power and a degree of proximity between the plaintiff and the defendant which would render it just and reasonable to postulate the existence of a duty of care. That approach is consistent with the reluctance of the law to impose liability for negligence arising out of an omission to act rather than out of the commission of positive acts which may injure persons or damage property.” (pp. 140-141)

In that case he found that although the decision by the respondent not to grant planning permission for any mining development within the area covered by the ban was the exercise by it of a statutory power, which would foreseeably result in their suffering financial loss, the exercise of that power was for the benefit of the public as a whole, and not for the benefit of a defined category of persons, of which the applicant was one (as in Siney and Ward v. McMaster [1985] I.R. 29; [1988] I.R. 337). He was therefore satisfied that there was no relationship of “proximity” between the applicants and the respondent “which would render it just and reasonable to impose liability on the respondent”. He also noted that, unlike the situation in both Ward v. McMaster and Siney, the situation here was not such that the applicants in incurring expenses were relying on the non-negligent exercise by the respondent of its statutory powers.

185. With regards to recovery of purely economic loss, he noted that it was settled, that such was recoverable in cases of negligent misstatement, as in Hedley Byrne v. Heller and Panners Ltd [1964] AC 465, and was recovered for the cost of remedial works in both Ward and Siney for which the respondents were held to have been responsible for. As to economic damages generally, he observed:

“The reason why damages for such loss - as distinct from compensation for injury to persons or damage to property - are normally not recoverable in tort is best illustrated by an example. If A sells B an article which turns out to be defective, B can normally sue A for damages for breach of contract. However, if the article comes into the possession of C, with whom A has no contract, C cannot in general sue A for the defects in the chattel, unless he has suffered personal injury or damage to property within the Donoghue v. Stevenson [1932] AC 562 principle. That would be so even where the defect was latent and did not come to light until the article came into C's possession. To hold otherwise would be to expose the original seller to actions from an infinite range of persons with whom he never had any relationship in contract or its equivalent.”

However, ultimately, he expressly reserved his position on this point.

186. Nonetheless, one other issue which arises in the present case in relation to negligence is the fact that the Department relied upon legal advice received from the Chief State Solicitor’s Office. It has frequently been the case that the question of legal advice has been considered in the context of negligence where it has not been taken. The Courts have consistently held that the failure to seek or obtain legal advice will not necessarily be negligent. Thus Fennelly in Glencar stated:

“I do not consider that a general duty to take legal advice can realistically be imposed on public authorities. [However] [a]s a matter of principle, it would not be wise to rule out the possibility that a case may in the future present itself where the relationship between a person liable to be affected by a ministerial or other public law decision is entitled to expect that care will be exercised in and about the decision to take legal advice and the manner of its taking. At the least, I think it would have to be shown that the statutory power in question was of the type which is designed to protect particular interests and that the plaintiff comes within its scope. In addition, it would probably be necessary for the claim to arise from the context of the type of individual transaction which was the subject-matter of Ward v. McMaster [1988] I.R. 337 or perhaps from the sort of reliance on the expertise of another which formed the background to Hedley Byrne v. Heller and Panners Ltd [1964] AC 465.”

It is therefore clear that in most cases, unless the circumstances of the case specifically dictate, it will not be negligent for a public body to exercise its statutory powers without first obtaining legal advice.

187. However, in the present case, we are presented with a novel question: can a public body be negligent in the discharge of its functions despite obtaining legal advice? A number of considerations must also be considered in this case. It is clear that the Department knew that the SEUPB had issues with regards to it not forwarding the application, and informed it of the same in correspodence in 2004 when the Department was so considering. Furthermore, when requested by the Commission to provide the legal basis upon which it had so refused, it initially did not identify the basis upon which this was done. The legal advice obtained by the Department was never presented to the Commission, nor was it tendered before this Court; although the substance is aparent from the letter of the SEUPB to the Commission in 2008. This advice, in any event, turned out to be entirely incorrect. The Commission was expressly critical of the way in which the Department handled its investigation, and at one point even threatened to bring proceedings under the Treaty for failure to comply with its requests. All of these facts point to a reprehensible attitude of the Department in its dealings with the Interreg application.

188. Nonetheless, I do not feel that it would have been open to me, as a matter of law, to find that the Department was negligent in this case. It would be a dangerous precedent if a government department could be held negligent even though it sought and obtained legal advice, even though, I would note, that advice was wholly incorrect and was not properly presented to either the Court or, in this case, the European Commission. The Plaintiff could not there be guilty of negligence, although in light of my finding that it was in breach of statutory duty such a finding would, in any event, have been superfluous.

Loss of Chance:-

189. Having regard to my findings supra, only two issues remain in relation to the Interreg grant:

i) Can the Defendant recover damages where the grant was not certain?

ii) If so how does this affect the quantum of damages?

190. The law in relation to loss of chance would seem to be established and agreed between the parties; it is only in relation to the actual application of that law to the facts herein which is disputed. Stuart Smith L.J. in Allied Maples v. Simmons & Simmons [1995] 1 WLR 1602 at 1614:

“[T]he plaintiff must prove as a matter of causation that he has a real or substantial chance as opposed to a speculative one. If he succeeds in doing so, the evaluation of the chance is part of the assessment of the quantum of damage, the range lying somewhere between something that just qualifies as real or substantial on the one hand and near certainty on the other. I do not think that it is helpful to seek to lay down in percentage terms what the lower and upper ends of the bracket should be.”

Waller L.J. in North Sea Energy Holdings NV v. Petroleum Authority of Thailand [1998] EWCA Civ 1953, noted that even where this is shown:

“[A] plaintiff … must then in relation to the contingencies dependent on the actions of third parties show (and again this must be on the balance of probabilities) that he had a substantial chance rather than a speculative one.”

191. I would agree that these cases identify the correct approach:

i) A claimant must show that it had, on the balance of probabilities, a real and substantial chance of success, not merely a speculative one;

ii) This extends to showing that there were not actions which, on the balance of probabilities, would have prevented that chance from being real and substantial;

iii) Once this is done, the Court will assess the quantum of damages based on the likelihood of that chance.

192. In the present circumstances I am satisfied, having regard in particular to the evidence of Mr. McKinney, that the Defendant’s application, had it been presented before the Steering Committee, would have been successful. I am also satisfied that despite the alleged inconsistencies contained in the Defendant’s application, there was a real and substantial chance that the independent assessor performing the investment appraisal would have determined that the project was capable of being undertaken by the Defendant, and that subsequently the Defendant would have become entitled to draw monies down. With regards to the allegation that the project would not, in any event, have been able to proceed within time because of the disputes in relation to the lease, or with regards to the present litigation, I am satisfied that, in light of my findings supra., it would not be equitable to allow the Plaintiff to rely on its own fault in this regard; ex injuria jus non oritur. I therefore proceed on the basis that consents would have been forthcoming, as I have held they should have been, and that this project would have been able to proceed significantly before the 2008 deadline for the drawdown of grant monies; equity considers that as done which ought to have been done.

193. With regards to the quantum, I think that a reasonable assessment, having regard to all of the above, in particular my consideration of the working practice of the Defendant in the construction of the marina to date, and baring in mind the difficulty of drawing any exact conclusions upon hypothetical cases, that a figure of 50% with regards to loss of chance is a reasonable one. I would therefore grant special damages in relation to the Defendant’s counterclaim for loss of chance arising out of the Plaintiff’s breach of statutory duty in the amount of €1,045,000. I will reserve any decision as to general damages pending further submissions from the parties in light of the judgment herein.

Conclusion:
194. To summarise my conclusions herein:

i) The Plaintiff may not rely on the Forfeiture Notice of the 12th June 1998 since:-

a) it was abandoned by agreement, either express or inferred; or,

b) even in the absence of any agreement, the length of time between its issuance and the reliance placed thereupon was such that it would be inequitable to allow the Plaintiff to rely on it, and I would therefore grant relief against forfeiture in relation thereto;

c) even however if I was wrong in this regard I would exercise my discretion to allow relief against forfeiture;

d) in consequences of these findings the terms and conditions of the lease remain binding on the parties hereto.

ii) Although the rent began to be due from 1993, as there were no representations by the Minister upon which the Defendant can rely upon to remit any or part of the rent, it is only recoverable since 1999 because of the operation of the Statute of Limitation 1957 – the amount outstanding in this regard is therefore €115,328.14 (IRŁ90,828.29);

iii) In light of my other findings, I would exercise my discretion to allow relief against forfeiture despite more than 1 years’ rent being due, subject to the payment of the outstanding rent identified at (ii);

iv) The Plaintiff unreasonably withheld its consent by refusing to consent to the removal of the dredge material;

v) The Plaintiff was unreasonable with regards to its demands for a performance bond on terms that were impossible to reasonably obtain, although the Plaintiff is entitled to a bond in accordance with the agreement of the 19th May 2000, if the Plaintiff so requires, in the sum of €317,434.52 (IRŁ250,000), of suitable duration and which specifies the cover of all works set out in the Schedule of Works to be agreed, the general terms of which are to reflect existing commercial construction norms;

vi) Neither the issue of planning permission nor the quality of the breakwaters were major factors in the delay considered herein or in the overall dispute between the parties, and therefore those issues have weighed little in the Court’s determination;

vii) The Plaintiff’s actions were not unreasonable with regards to:

a) Provision of a Schedule of Works,

b) Provision of detailed drawings, plans and technical specifications with regard to the breakwaters;

viii) The Defendant trespassed outside the leased area;

ix) The Plaintiff was guilty of a breach of statutory duty giving rise to a loss of chance with regards funds from the Interreg IIIA Scheme grant, to a level, in my opinion, of approximately 50%.

195. In light of these conclusions I will await further submissions on the precise orders to be made, including what further terms and conditions it may be appropriate upon which to grant relief against forfeiture, and secondly, since the award of special damages in favour of the Defendant arises out of the landlord and tenant relationship of the parties and the Interreg IIIA Scheme, what terms and conditions may be appropriate to impress upon the award in such circumstances.

196. I also reserve to a later date the issue of general damages in relation to the Plaintiff’s unreasonable withholding of consent and breach of statutory duty, and with regards to damages, if any, for the Defendant’s trespass, or breaches of covenant.

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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> The Minister for Communications & Ors -v- Figary Watersports Development Company Ltd [2010] IEHC 541 (03 September 2010) URL: http://www.bailii.org/ie/cases/IEHC/2010/H541.html Cite as: [2010] IEHC 541

High Court of Ireland Decisions