26 March 2007
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16 April 2013
Perhaps unsurprisingly given the recent property boom in Ireland, property litigation has increased significantly over the last few years. There is a number of factors that may have influenced this, not least the availability of the Commercial Court, the value of the transactions involved and the sometimes complex manner in which the transactions are structured. The convergence of all of these factors has resulted in litigators being busier than ever before.
The Commercial Court in Ireland has now been in operation for more than two years. It has jurisdiction to deal with several types of conflicts that have repeated application in property disputes. They include disputes relating to: a business document, business contract or business dispute where the value of the claim or counterclaim is not less than E1m (£684,900); or the determination of any question of construction arising in respect of a business document or business contract where the value of the transaction, the subject matter thereof, is not less than E1m.
Given the exorbitant property prices in Ireland, the E1m value threshold is easily exceeded. The advantage in gaining access to the Commercial Court is access to a fast-track decision by the courts in an unprecedented swift timescale. As of 12 January 2007, the average time from entry into the Commercial Court list to the allocation of a hearing date was nine weeks. From entry to the list to the decision, the average time was 18 weeks.
Historically, one of the main disadvantages to proceeding with a property dispute before the courts was that it was likely to take two and a half to three years before the matter ultimately reached trial. Now the matter can come before the courts within five months. Consequently, litigation is a far more appealing option in resolving a dispute.
The Commercial Court is also used for planning disputes, particularly relating to decisions made by An Bord Pleanála (the Irish planning appeals board).
The Commercial Court rules say: "An Appeal from, or application for a judicial review of, a decision or a determination made or a direction given by a person or body authorised by statute to make such decisions or determination or give such directions, where the judge of the High Court Commercial List considers that the appeal or application is, having regard to the commercial or any other aspect thereof, appropriate for entry in the High Court Commercial List."
Historically, disgruntled developers dissatisfied with planning board decisions would not have reviewed the decision judicially because it was likely to take two years before the judicial review could be dealt with, and in the meantime highly leveraged lands would remain 'sterilised' pending the outcome of the judicial review. Even if successful, the only likely result of the judicial review would be to overturn the original decision made by the planning board, but the application would have to be remitted to the planning board, which would then be obliged to consider it again de novo, resulting in further delays.
The new Commercial Court expedites the process. The recent case of Meath County Council and An Bord Pleanála and Taggart Homes Ireland Limited and J&T Developments Ireland Ltd (2006) is a case in point. This case was instituted by the local authority, which sought to overturn a planning permission granted by the planning board to Taggart and J&T Developments on the basis that the planning board had failed to include a condition in compliance with Part V of the Planning and Development Act 2000. This act (as amended) requires that the planning authority include, as a condition in any planning permission granted, provision of social and affordable housing as part of any housing scheme.
In this case the planning board failed to do so. Meath County Council sought an order of certiorari to quash the decision of the planning board and an order returning the matter to the board for reconsideration. As the planning permission had been granted on 23 May 2005 and the subsequent application by the local authority was not brought until 24 July 2006, the prospective developer felt at a considerable disadvantage. It applied to have the matter transferred to the Commercial Court in order to expedite a decision. Mr Justice Kelly was happy to adopt the matter into the Commercial Court regime.
Ultimately the case settled. This is not unusual in the Commercial Court. Of 189 cases that have come before the Commercial Court, 79 per cent of them have settled either at or prior to hearing. This case does, however, provide a very good example of how the Commercial Court can be utilised to deal with property and planning disputes swiftly and efficiently.
One of the other motivating factors in the growth of property litigation in Ireland is the inflated value of the property transactions in the marketplace. With increased stakes, parties are prepared to fight harder. And the courts have responded favourably.
The final motivating factor behind the growth of property litigation relates to the complex tax structures used to facilitate the most efficient form of property transfer. Clearly, the more complex a structure is, the more opportunities there are for relationships, and indeed the structures, to break down and for a dispute to occur. The recent high-profile case of Sean Dunne v Kevin Warren (2005) evidences this.
This case related to the proposed sale by Dunne of his 50 per cent share and interest in the Whitewater Shopping Centre to Warren. Draft heads of terms with preliminary terms were concluded and marked 'Subject to Contract/Contract Denied'. These provided that Warren would acquire Dunne's interest on the basis of a site purchase and development agreement and also provided that a put and call option be included in the contract. A contract for sale was concluded for a price of E37.5m (£25.68m). An option agreement was entered into between the parties to deal with a situation where the parties were unable to agree on a development agreement.
It was argued by Warren that the interim put and call agreement had expired and, notwithstanding the fact that there had been no agreement in relation to the development agreement, Warren claimed that there was a binding contract for the sale by Dunne. Dunne sought a declaration that there was no enforceable agreement and an injunction restraining Warren from claiming that there was or continued to be a binding contract. These proceedings were transferred to the Commercial Court immediately following inception, and although they ran for a number of days they were ultimately settled at terms advantageous to both parties.
This case is indicative of the fact that the more complex the arrangements between the parties, the more likely the relationship is to break down and end up before the courts. It is perhaps not surprising, given the cocktail of the vast sums involved, together with access to a fast-track mechanism, that more property disputes will be determined by the courts.
•Lisa Broderick is a commercial litigation and dispute resolution partner at Matheson Ormsby Prentice