Castlemanor €6m contracts must be performed - court

A former ACC Bank manager in Cavan and three other prominent businessmen in the town must, within three months, perform contracts valued at about €6m related to the purchase of 22 houses in the Castlemanor retirement village, the Commercial Court has ruled. Mr Justice Peter Kelly made those orders against Brendan Hannan, former manager of the ACC branch in Cavan, and three other businessmen - Oliver Malone, Sean McGuigan and John Olwill, all customers of that bank, who had, with Mr Hannon, formed the Hammo Partnership which was involved in property purchase and development. The judge did so after upholding claims by Desmond Murtagh Construction Ltd (in receivership) and the estate of the late Desmond Murtagh, they were entitled to orders for specific performance of contracts related to the Castlemanor retirement village, Billis, Drumalee, Cavan, built by Mr Murtagh and his company. Mr Murtagh died in June 2009 just months after ACC appointed a receiver to his company. The plaintiffs claimed some €1.804m was payable to the estate of Mr Murtagh for the 22 units while €4.136m was payable to his company on foot of building agreements. They sought orders requiring the defendants complete contracts of November 2007 for sale of 22 housing units at the Castlemanor village. Twenty-six other units were previously sold. Outlining the background, the judge said the defendants formed the Hammo Partnership in 2002. They bought the Billis lands in 2005 for €1.7m and spent another €1.3m paying off a man who introduced them to the lands and in obtaining planning permission. In 2007, they offered the lands for sale of €9m and Mr Murtagh bought them for €7m. "Not content with having doubled their money," the partnership sought to derive further fiscal benefit by entering into arrangements "driven by tax avoidance motives", the judge said. Under contracts of November 2007, they agreed to purchase back a total of 48 units in the Castlemanor development from Mr Murtagh. The building works were completed "to a high standard" and by summer 2008, all 48 houses were substantially complete and 26 units were sold, the judge said. By July 2008, the plaintiffs believed the defendants had become reluctant to close the remaining sales. In December 2008, a controversy relating to a €1.5m bond the defendants were to provide as a deposit for the contract of sale and building agreement ultimately led to a receiver being appointed to the Murtagh company in February 2009. A central issue in the case was the defendants' claim they were not obliged to perform the contract because of alleged failure to implement a planning permission condition - condition 33 - for works concerning a sewer pipeline from Billis Cross to Drumalee Cross. Mr Murtagh and his company were willing and able to carry out those works but Cavan County Council did not want them to install the sewer pipe until it got finance from the Department of the Environment for water main works to be carried out in the same area, the judge found. The Council, for very good reasons, wanted both sets of works to be carried out at the same time as they would involve major traffic disruption. The only reason the sewer was not installed was because of the Council's requirements, the judge found. The Murtagh side was constantly engaging with the Council to enable the sewer works be carried out but the Council was frustrated due to failure to get monies for the water works. In the circumstances, there was substantial compliance with condition 33. The judge also described as "unconvincing" the evidence of the defendants they were unaware of the sewer not being built. "They are canny men and I do not believe that they were complete candid with the court." He believed the defendants had been searching for some time for "a legal excuse" to avoid their obligations under the contract. The judge also rejected the defendants' claims other planning conditions were not met and concluded the plaintiffs were not in breach of any obligation owed to the defendants. That finding did not mean there were no unfulfilled obligations concerning the sewer works but he was satisfied to accept the receiver's undertaking he would discharge those obligations when required and had the funds to do so, he added. There was little prospect of the sewer works being carried out until the Department of the Environment provided funds to install the water main, he noted. In all the circumstances, the plaintiffs were entitled to specific performance of the contracts, he ruled.