Judgment
Title: | Minister for Communications Marine and Natural Resources -v- Figary Water Sports Development Company Limited |
Neutral Citation: | [2015] IESC 74 |
Supreme Court Record Number: | 290/12 |
High Court Record Number: | 2005 3374 P |
Date of Delivery: | 07/30/2015 |
Court: | Supreme Court |
Composition of Court: | Clarke J., Laffoy J., Charleton J. |
Judgment by: | Laffoy J. |
Status: | Approved |
Result: | Allow And Vary |
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| Judgments by | Link to Judgment | Concurring | Laffoy J. | | Clarke J., Charleton J. | |
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THE SUPREME COURT[Appeal No. 290/2012]
Clarke J.
Laffoy J.
Charleton J.
BETWEEN
THE MINISTER FOR COMMUNICATIONS, MARINE AND NATURAL RESOURCES
APPELLANT
AND
FIGARY WATER SPORTS DEVELOPMENT COMPANY LIMITED
RESPONDENT
Judgment of Ms. Justice Laffoy delivered on 30th day of July, 2015
A – Introduction
Background to appeal
1. The High Court proceedings which are the subject of this appeal, in which the appellant (the Minister) was plaintiff and the respondent (Figary) was defendant, were commenced by plenary summons which issued on 10th October, 2005. As initiated, the objective of the proceedings was to enforce Figary’s obligations as lessee under a foreshore lease granted by the Minister, as lessor, in exercise of the power vested in him by s. 2 of the Foreshore Act 1933 (the Act of 1933) or, alternatively, to obtain possession of the foreshore the subject of that lease. In its defence and counterclaim delivered on 26th April, 2006 in the High Court proceedings, Figary opposed the claims of the Minister either to enforce the lease against Figary or, alternatively seeking possession. In addition, Figary counterclaimed for –
2. In essence, the bases of the claim by the Minister against Figary and of the counterclaim of Figary against the Minister were founded on the following:
(a) the landlord and tenant relationship between the Minister and Figary arising from the foreshore lease; and
(b) the respective rights and obligations of the parties under a grant application made by Figary for funding under the European Structural Funds 2000 – 2006, in particular, under Interreg IIIA Programme for Ireland and Northern Ireland 2000 – 2006 (the Interreg IIIA Programme) in aid of a project which involved the development by way of expansion of a marina on the foreshore the subject of the foreshore lease at Fahan, County Donegal (the Marina), in respect of which the Minister’s Department had the role of implementing agent under a very complex scheme structure for the regulation and administration of the Interreg IIIA Programme.
3. The matter having been heard in the High Court before McKechnie J. over sixteen days, judgment, primarily on issues of liability, was delivered on 3rd September, 2010 ([2010] IEHC 541) (the First Judgment). Subsequently, on 19th January, 2012, McKechnie J. delivered a further judgment ([2012] IEHC 601) (the Second Judgment) in which he determined the remaining issues as to the reliefs to which the Minister was entitled on the claim and Figary was entitled on the counterclaim. That resulted in an order of the Court dated 27th January, 2012, which was perfected on 12th June, 2012. In summary, the perfected order, the detail of which will be considered later, ordered as follows:
4. Notice of appeal was filed on behalf of the Minister on 25th June, 2012 against some parts only of the judgments and the order of the High Court. Specifically, the Minister –
(a) appealed against the dismissal of the Minister’s claim for possession as against Figary and sought in lieu thereof an order for possession against Figary,
(b) appealed against the granting of judgment to Figary on its counterclaim in the sum of €2,045,000 and sought instead an order dismissing the counterclaim, and
(c) appealed against the award of four day’s costs of the proceedings in the High Court as against the Minister and sought instead an order awarding all costs to the Minister.
The appeal: general observations
5. A significant feature of the appeal which it is important to stress even at the outset is that, consequent apparently on a deliberate decision to that effect, there was no cross-appeal or notice to vary served on behalf of Figary in relation to various issues which arose on the claim and on the counterclaim and which were determined in a manner favourable to the Minister and unfavourable to Figary. Accordingly, in broad terms, what this Court is concerned with on the appeal in relation to the issues arising from the landlord and tenant relationship of the Minister and Figary is whether the Minister is entitled to possession of the foreshore demised to Figary, rather than the relief in relation to the demised foreshore in the form of conditionality attached to Figary’s entitlement to relief against forfeiture which was given in the High Court, which will be outlined in detail later. In relation to Figary’s counterclaim in respect of the grant application under the Interreg IIIA Programme, the Court has to decide whether the Minister is liable for the wrong alleged and, if so, the appropriate quantum of damages.
6. It is suggested that each of the parties has shifted position in the course of the judicial process.
7. That is certainly true in the case of the Minister. The relief he sought in the plenary summons and in the statement of claim was primarily injunctive relief. For instance, the first relief sought by the Minister was a mandatory order directing Figary to take all steps and do all things forthwith for the purposes of constructing and completing the Marina upon the demised premises. The third relief sought was an order directing Figary to pay and discharge all arrears of rent which had accrued due to the Minister. It was only at item 14 in the prayer for relief that the Minister sought possession in the following terms:
“Without prejudice to the foregoing, in the alternative the [Minister] seeks an Order for possession by virtue that the aforesaid Lease stands forfeited pursuant to Forfeiture Notice dated the 12th of June 1998 of the premises described in the Schedule hereto hitherto held by [Figary] as Tenant to the [Minister] on foot of the aforesaid Lease . . ., which said possession is sought pursuant to Section 52 of the Landlord and Tenant Amendment Act, Ireland, 1860, there being a sum in excess of one year’s rent in arrears at the date of the institution of these proceedings.”
The Landlord and Tenant Amendment Act, Ireland, 1860 referred to is commonly known as “Deasy’s Act”. In the First Judgment the position of the Minister in relation to the relief which he wished to obtain in the High Court was summarised as follows (at para. 87):
“However, it has been indicated to the Court that although the [Minister] was originally seeking [Figary] to perform various works and in the alternative was seeking possession, the present situation is such that the primary relief now sought is possession; [Figary] has done very little despite persistent calls and is effectively a ‘bad tenant’ whom the [Minister] wants out. Furthermore, at this stage [Figary] still owes €206,749 in rent, although it has, on four occasions since May 2006, paid €136,080 to the [Minister] in consideration of such rent.”
8. It is suggested on behalf of the Minister that a shift in position on the part of Figary has occurred on the appeal. In its counterclaim Figary pleaded that the Minister had wrongfully, and in breach of covenant and in breach of statutory duty, frustrated Figary in its endeavours to develop and operate the Marina and to carry out agreed ancillary works under and in accordance with the terms of the lease and its obligations in law. Various alleged breaches of covenant were particularised which, in broad terms, were based on the contention that the Minister had unreasonably withheld and delayed furnishing consents and permissions sought by Figary and had insisted upon the imposition of unreasonable conditions. The allegations of Figary are dealt with in the First Judgment (at paras. 130 to 156) and the findings of the High Court are summarised in the Second Judgment (at para. 5). Of five allegations summarised, the High Court found that the Minister acted unreasonably in relation to two allegations: the removal of dredged material; and in imposing requirements in relation to the plaintiff’s obligation to put an insurance bond in place. Those findings will be explained later in the context of consideration of the party’s landlord and tenant relationship. Nothing arises on the appeal in relation to the findings of the High Court on the other allegations of breach of covenant.
9. The alleged breach of statutory duty as particularised (albeit in a most generalised manner) in the counterclaim which remains an issue is based on the contention that the Minister –
“prevented [Figary] from securing and/or failed to reasonably assist [Figary] in securing funding under the relevant EU structural funds”.
The reference there to the “relevant EU structural funds” was to the Interreg IIIA Programme. In response to a request in a notice for particulars from the Chief State Solicitor for details of each and every alleged “prevention” attributed to the Minister in relation to securing EU structural funds, the specific conduct on the part of the Minister relied on by Figary was that the Minister “declined to present [Figary’s] application for grant funding to the Interreg Steering Committee that met in January 2005”. In response to a similar request for details of each and every alleged assistance Figary asserts the Minister should provide in relation to EU structural funds, the response of Figary was:
“. . . same and no less assistance than any other applicant for funding”, giving “a sample”, by reference to correspondence Figary had received from the Minister in 2004, of what it had been led to expect. Figary was not asked to, and did not, identify what statutory obligation on the part of the Minister was alleged to have been breached in relation to Figary’s grant application under the Interreg IIIA Programme.
10. The suggested shift in position on the part of Figary on the appeal was pointed to in the submissions made on behalf of the Minister in this Court in reply to the submissions made on behalf of Figary. It was submitted that in the High Court Figary had argued that the Minister’s failure to progress its application for grant funding under the Interreg IIIA Programme to the Steering Committee was a breach of statutory duty, in that the Interreg IIIA Programme was governed by a regulatory framework the breach of which might give rise in appropriate cases to an action for breach of statutory duty. However, the argument made in this Court was that the failure of the Minister to progress Figary’s application constituted a breach of EU law intended to confer a benefit or right on an identifiable group, including Figary. It was pointed out on behalf of the Minister that the judgments in the High Court did not, in terms, involve any analysis of the regulatory framework of the Interreg IIIA Programme. That is true and it is also true that the range of decisions of the Court of First Instance and the European Court of Justice which were relied on by Figary on the appeal were obviously not addressed in the submissions in the High Court. Having said that, it is appropriate to record that in the summary of the findings on the claim of breach of statutory duty against the Minister in the First Judgment (at para. 177), which is quoted later, it was noted that a breach of a duty under European law will give rise to an action for damages as if it were a breach of statutory duty. In my view, it was open to Figary to pursue the claim for damages for breach of statutory duty on the basis on which it was pursued in the Court.
11. Even though some of the issues which arose in the High Court do not have to be addressed on the appeal, there remains an element of overlap between the remaining issues on the claim and the counterclaim. Nonetheless, I am satisfied that it is possible to address all of those issues under two headings, namely:
(a) the landlord and tenant relationship of the parties; and
(b) the grant application under the Interreg IIIA Programme, which, while giving rise to a separate and distinct claim by Figary against the Minister, cannot be wholly divorced from the landlord and tenant relationship.
That is the course I propose to adopt.
B. – Landlord and Tenant Relationship
Core factual issues
12. The history of the landlord and tenant relationship between the Minister and Figary is comprehensively outlined in the First Judgment. Therefore, it is only necessary to outline the core factual circumstances which are likely to inform the decision on the appeal.
13. The landlord and tenant relationship was created by a lease dated 26th April, 1993 made between the Minister (then the Minister for the Marine) of the one part and Figary of the other part (the Foreshore Lease), which created a demise of part of the foreshore situate in the Townland of Fahan, Barony of Inishowen West and County of Donegal comprising ten hectares, as depicted on the map annexed thereto for the term of ninety nine years from the 1st January, 1993 at the yearly rent specified, which was subject to remission during the first five years and was subject to review at five yearly intervals thereafter, and which was also subject to the covenants and conditions therein contained. Despite what has transpired over the last two decades Figary remains in possession of the foreshore demised by the Foreshore Lease. The relevant provisions of the Foreshore Lease and, in particular, the covenants on the part of Figary, qua lessee, are outlined in detail in the First Judgment. Probably the most important obligation imposed on Figary in the lessee’s covenants was the obligation to construct a marina on the demised premises in accordance with the terms and conditions set out in the second schedule to the Foreshore Lease. Those terms and conditions, which were headed “Technical Specifications”, were to some extent very general in terms. However, it was provided that the structure comprising the marina was to be erected on the foreshore in conformity with plans and drawings to be submitted and approved by the Minister and it was stipulated that Figary would provide the Minister with certain information, for example, detailed cross-sections of the breakwater. It was also provided that Figary was required to submit technical specification of the proposed works for the approval of the Minister prior to the commencement of the development. There followed some detail in relation to sanitary facilities, litter and pump out facilities. There were also general provisions in relation to the provision of safe navigational access to and from the marina.
14. As is pointed out in the First Judgment (at para. 8), despite the terms of the Foreshore Lease, no work was carried out on the project prior to 1998. In the first half of 1998 there was some interaction between the then Minister and the representatives of Figary, which did not resolve the differences between the parties. Eventually, on 12th June, 1998, the Chief State Solicitor, on behalf of the Minister, served a forfeiture notice under s. 14 of the Conveyancing Act 1881 (the Act of 1881) on Figary. The forfeiture notice recited many of the covenants on the part of Figary contained in the Foreshore Lease. It also recorded the proviso for forfeiture contained in the Foreshore Lease to the effect that, if the rent or any part thereof should be unpaid for twenty one 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 and on the part of Figary to be observed and performed, then the term thereby created should cease and determine and the Minister might re-enter into and upon the demised premises and repossess the same without prejudice to any remedy of the Minister under any covenant by the lessee contained in the Foreshore Lease. Of course, it was recognised that, as a matter of law, the proviso for forfeiture was subject to the provisions of s. 14(1) of the Act of 1881 and was not enforceable for breach of covenant, other than the covenant to pay rent, unless and until the Minister served a forfeiture notice on Figary specifying the particular breach complained of and, if the breach was capable of remedy, requiring Figary to remedy the breach, and, in any case requiring Figary to make compensation in money for the breach. Accordingly, the forfeiture notice then set out the various breaches alleged on the part of Figary: non-payment of rent, the total arrears at the time being IR£72,000; failure to construct the marina in accordance with the terms and conditions set out in the second schedule to the Foreshore Lease; failure to obtain prior consent for the excavation, removal and stockpiling of beach material and to comply with prohibitory notices which had been served by the Minister upon Figary pursuant to s. 7 of the Act of 1933, as amended; breach in relation to the construction of a breakwater and the excavation of beach materials; failure to procure a bond; certain alleged breaches of the planning code; and failure to keep the demised premises in good and proper state of repair and free from all defects injurious to navigation or the adjacent land or public interest.
15. Matters between the parties seem to have stalled thereafter, with little progress of consequence until 2000. There was further interaction between the parties in the first half of 2000, which is outlined in the First Judgment. It culminated in a number of letters between the Minister’s Department and Michael Galbraith Associates (Galbraith), the architects and surveyors retained by Figary. The chronological sequence of the correspondence was as follows:
The position of the Minister in the High Court, as recorded in the First Judgment (at para. 36), was that subsequently Figary had failed to meet the four requirements contained in the first letter of 19th May, 2000 and, in those circumstances, the forfeiture notice had not been waived.
16. The project was then embarked on by Figary and the marina was constructed. As is recorded in the First Judgment (at para. 39), in September 2002 the Marina at Fahan was opened and became operational, although, at that stage, it was still only partially complete. Throughout 2001 and 2002 there was ongoing acrimony between the Minister and Figary, mainly in relation to how dredge sand, which the Minister alleged had been dumped on the foreshore, was to be treated. In that period and in 2003, as is recorded in the First Judgment (at para. 41), the Minister continued to have concerns about the operation of the Marina and the failure by Figary to comply with its obligations under the Foreshore Lease, for example, the obligation to pay rent. The interaction between the Minister’s Department and Figary, mainly in correspondence, through those years and into 2004 and 2005 is comprehensively outlined in the First Judgment. By late 2005 another issue had arisen between the parties, in that an official of the engineering section of the Minister’s Department had carried out a survey of the development and had discovered that Figary had extended beyond the demised premises and had encroached on foreshore and had, effectively, trespassed on State foreshore. That situation still persisted when the matter was before the High Court. As has been stated at the outset, the proceedings were initiated in October 2005.
Outline of findings in the First Judgment on the landlord and tenant relationship issues/relevant grounds of appeal.
17. Having outlined the provisions of s. 14(1) and (2) of the Act of 1881, and a number of relevant authorities, it was held in the First Judgment that the forfeiture notice was valid when it was issued. However, a question was raised whether, given the intervening events and the significant time between the issue of the forfeiture notice (12th June, 1998) and the initiation of the proceedings (10th October, 2005), the Minister could still rely upon it. The conduct of the parties after the service of the forfeiture notice was considered in the First Judgment (at para. 119), where it was stated that it was clear from looking at the correspondence subsequent to the service of the forfeiture notice that the parties were actively engaged in attempting to gain compliance with the covenants contained in the Foreshore Lease and that the Minister had continually sought to rely on those covenants. Having referred to the correspondence of 19th May, 2000, it was stated:
“Whatever the [Minister’s] intention: the wording of its correspondence and [Figary’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.”
18. The circumstances in which relief against forfeiture may be granted having been addressed earlier in the First Judgment, the question of relief in the prevailing circumstances was considered (at para. 120), where it was stated:
“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 . . ..”
In summarising his conclusions in the First Judgment (at para. 194) the trial judge stated that the Minister could not rely on the forfeiture notice because it was abandoned by agreement, either express or inferred. Alternatively, even in the absence of agreement, he would grant relief against forfeiture. He deferred the determination of the terms and conditions on which it would be appropriate to grant relief against forfeiture until he would hear further submissions (at para. 195). Subsequently he dealt with those terms and conditions in the Second Judgment.
19. In summary, the grounds on which the Minister appealed the decision of the trial judge on the forfeiture issue were that –
(a) he erred in law and on the facts in holding that the Minister could not rely on the forfeiture notice;
(b) he erred in fact and/or law in concluding that the forfeiture notice had been abandoned by agreement, either express or to be inferred;
(c) he erred on the facts in holding that the Minister had continually sought to rely upon the terms of the Foreshore Lease after service of the forfeiture notice and that, accordingly, it could be inferred that there was some agreement between the parties that the Foreshore Lease, and the covenants therein contained, continue to be active;
(d) he erred in law and on the facts in construing that the contents of the letter dated 19th May, 2000 from the Minister meant that Figary’s acceptance of the conditions stipulated in that letter, as opposed to its compliance with the said conditions, constituted an agreement pursuant to which the forfeiture notice was abandoned and the Foreshore Lease treated as being active and in force from that point on; and
(e) he erred in determining that the forfeiture had been waived without taking any proper account of the evidence of the Minister to the effect that any reinstatement of the Foreshore Lease, if accepted, was conditional on Figary meeting the conditions set out in the first letter of 19th May, 2000, which conditions were never met.
20. On the appeal it was also contended that the trial judge erred in exercising his discretion to grant relief against forfeiture to Figary, notwithstanding clear evidence of multiple breaches of covenant on the part of Figary and that, in particular, he erred in granting relief where –
(a) no rent had been paid under the Foreshore Lease until very shortly before the commencement of the trial;
(b) Figary had not completed the works required to be carried out under the terms of the Foreshore Lease; and
(c) Figary had carried out works on the site without any permission of the Minister to do so, as required under the terms of the Foreshore Lease.
It was also contended that the trial judge had erred in having regard to the equitable principles of laches and delay in the consideration of the discretion to grant relief against forfeiture.
21. The counterclaim by Figary against the Minister for damages for breach of contract and breach of covenant arose out of the parties’ landlord and tenant relationship. The ultimate outcome of this aspect of the counterclaim was that the trial judge found that the Minister was not liable in damages to Figary for any of the alleged breaches. However, the Minister has appealed certain findings of the trial judge and those findings and the relevant grounds of appeal will be considered insofar as it is necessary to do so after the issues in relation to forfeiture and relief against forfeiture and the Minister’s claim for possession under s. 52 of Deasy’s Act have been addressed.
22. The first issue which arises for consideration by this Court in relation to the landlord and tenant relationship is whether the forfeiture notice was waived or abandoned.
Status of forfeiture notice when proceedings initiated and consequences
23. The starting point in considering the subsequent effect of the forfeiture notice is the finding in the High Court that at the time of its issue it was a valid notice. In reaching that conclusion the trial judge identified the various requirements of s. 14(1) of the Act of 1881 and he was satisfied that they were complied with. I did not understand Figary to take issue with that finding. The trial judge went on to state that there was no question in his mind that, had the Minister sought repossession of the demised foreshore on foot of the forfeiture notice in the months following its receipt by Figary, in circumstances where the breaches of the covenants in the Foreshore Lease had not been remedied, the Minister could have validly relied on the forfeiture notice. As has already been noted, he raised a question as to whether, given the intervening events and lapse of time, the Minister could still rely on it.
24. It is important in this context to emphasise that the finding and the remarks of the trial judge in relation to the forfeiture notice related to a right of re-entry or forfeiture which was governed by, and subject to the restrictions stipulated, in s. 14 of the Act of 1881. Accordingly, it related to a right of re-entry or forfeiture under the forfeiture proviso in the Foreshore Lease for breach of covenant, other than non-payment of rent. By virtue of subs. (8) of s. 14 that section does not affect the law relating to re-entry or forfeiture or relief in the case of non-payment of rent. What compliance with subs. (1) of s. 14 does is to give the lessor the right to enforce, by action or otherwise, the right of re-entry or forfeiture. Accordingly, as was remarked by the trial judge, the Minister within a reasonable time after Figary failed to remedy the breaches of the covenants in the Foreshore Lease could have enforced the right of re-entry or forfeiture by action or otherwise. Of course, had the Minister done so, Figary would have been entitled to claim relief against forfeiture under subs. (2) of s. 14.
25. In outlining the legal position which prevails following compliance with the requirements of s. 14(1) of the Act of 1881, the trial judge stated (at para. 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.”
That, in my view, is a correct statement of the law. It is well settled that after the requirements of subs. (1) of s. 14 are complied with, in order to enforce the right to forfeit and thus determine the lease, the lessor must either effect forfeiture by physically entering upon the demised premises with the intention of determining the tenancy or by issuing and serving proceedings for the recovery of possession of the demised premises.
26. Counsel for the Minister were correct in emphasising the distinction between the entitlement of a lessor to bring a lease to an end in reliance upon the lessee’s non-compliance with a valid forfeiture notice, on the one hand, and forfeiture itself, on the other hand. That was recognised by the trial judge in the passage from his judgment quoted in the next preceding paragraph and, in particular, his reference to the decision of the High Court (O’Hanlon J.) in Bank of Ireland v. Lady Lisa Ireland Limited.
27. What counsel for the Minister did not allude to, however, is that it is well settled law that a lessor, in electing to determine the lease for forfeiture, must do so unequivocally. In Bank of Ireland v. Lady Lisa Ireland Limited (at p. 408), O’Hanlon J. quoted what he referred to as the statement of the law in modern times to that effect from Halsbury, Laws of England, 4th Ed., Volume 27 at para. 428. In that same paragraph, the editors of Halsbury made it clear that, if the writ for possession contains an unequivocal demand for possession, the service of the writ operates as a final election to determine the term, whether judgment is obtained or not. The decision of the English High Court (Buckley J.) in Calabar Properties Ltd. v. Seagull Autos Ltd. [1968] 1 All E.R. 1 was cited in Halsbury as authority for the proposition that where the writ contains a claim for a permanent injunction, it is not an unequivocal election by the landlord to determine the lease on the grounds of forfeiture, following an earlier decision in Moore v. Ullcoates Mining Co. Ltd. [1908] 1 Ch. 575. O’Hanlon J. also followed that latter decision in Bank of Ireland v. Lady Lisa Ireland Ltd., although not in the context in which it was considered by Buckley J., namely, whether the writ was “an unequivocal claim for possession”. In the case before Buckley J., the plaintiffs had issued a writ claiming possession of premises. They also claimed, without prejudice to the foregoing, injunctions restraining the defendants from doing certain acts, which apparently would have been in breach of covenants in the lease. The plaintiffs then moved for injunctions pending the trial. On the defendants’ objection that, as the plaintiffs were claiming possession, they were not at the same time entitled to relief on the footing that the lease still subsisted, Buckley J. stated (at p.5):
“In my judgment, the relief which is claimed in this action is such that it cannot be said that the landlords have unequivocally decided to determine the lease and seek relief solely on the footing that the lease has come to an end. It would be open to them at the trial of the action to abandon their claim for possession and proceed with their claim for relief on the footing that the lease is still on foot. Accordingly, I think that the case is one which falls within the reasoning of Moore v. Ullcoates Mining Co. Ltd. . . ..”
28. The necessity for an unequivocal election by the lessor to issue and serve proceedings for possession in order to give rise to the termination of the lease by forfeiture, is also highlighted in another of the authorities referred to by the trial judge: the decision of the Court of Appeal of Northern Ireland in McIlvenny v. McKeever [1931] N.I. 165. There, having addressed the defence of waiver, Andrews L.J. pointed out that there were two exceptions or qualifications to the general proposition which he had set out in relation to waiver of forfeiture, which will be outlined later. The first exception was outlined by Andrews L.J. as follows (at p. 172):
“The first is that when once a landlord has definitely exercised his option of relying upon the forfeiture and has shown a final and unequivocal determination to take advantage of it by instituting proceedings in ejectment, no subsequent act, whether receipt of rent or otherwise, will be held to operate as a waiver.”
29. That first exception did not arise in these proceedings. The issue and service of the plenary summons could not have been treated as the election by the Minister to unequivocally seek possession of the demised foreshore so as to determine the Foreshore Lease by forfeiture. As has been pointed out at the outset, the primary reliefs sought by the Minister were of an injunctive nature seeking orders directing Figary to comply with the provisions of the Foreshore Lease, which claims must have been founded on the premise that the Foreshore Lease would continue. As the terms of the claim for an order of possession, as quoted above, make clear, it was expressly stated that the claim was to be on a without prejudice basis. Accordingly, the initiation of the proceedings could not be treated as a final and unequivocal election to determine the Foreshore Lease for forfeiture in October 2005. However, that observation is peripheral to the core issue on this aspect of the appeal.
30. The core issue on this aspect of the appeal is whether the Minister’s contention that the trial judge erred in finding that the forfeiture notice had been abandoned by agreement, either express or to be inferred, and that the Foreshore Lease was treated as being active and in force from 19th May, 2000 onwards was correct. It was submitted on behalf of the Minister that the correspondence of 19th May, 2000 must be considered in the context of the wider factual matrix that then existed between the parties and the evidence which was before the High Court. It was submitted that a proper analysis of what occurred leads to the conclusion that the Minister intended, and Figary agreed, that it would assume an obligation to actually perform all of the four conditions set out in the Department’s first letter of 19th May, 2000 as a condition precedent to the Foreshore Lease being revived. It was further submitted that the evidence before the Court established that no real effort was made by Figary to comply with those conditions. Counsel for the Minister relied on evidence adduced in the High Court in support of that contention.
31. Counsel for Figary submitted that the construction of the Department’s first letter of 19th May, 2000 contended for by the Minister was contradicted by its plain terms. Further, counsel for Figary reminded the Court of its limited jurisdiction in relation to findings of fact made and inferences drawn from evidence at first instance, as outlined in the judgment of McCarthy J. in Hay v. O’Grady [1992] 1 I.R. 210 (at pp. 217 – 218).
32. The judgment of Andrews L.J. in McIlvenny v. McKeever referred to earlier contains a useful summary of how the defence of waiver operates in answer to a claim for possession of demised property on the basis that the lease has been forfeited, although the facts underlying the issue in that case are totally dissimilar to the facts underlying the defence of Figary that the forfeiture notice in this case has been abandoned or waived. Andrews L.J. stated (at p. 172):
“Dealing first with the defence of waiver, it is well recognised that Courts of Law have always leant against forfeiture. . . . They have, accordingly, readily held that an alleged forfeiture has been waived if the lessor, with full knowledge of the breach of covenant or condition relied upon, has by some positive unequivocal act recognised the continued existence of the tenancy at a period subsequent to such breach. Acceptance of rent accruing due after the forfeiture, an action for the same, and even an unqualified demand for such rent, have been held to constitute such waiver, notwithstanding the lessor’s protest that he was acting without prejudice to his right to insist on a prior forfeiture. . . ..”
As recorded earlier, Andrews L.J. identified at least two exceptions or qualifications to that general proposition. In relation to the second exception he stated:
“The second is that where the breach is, as in the present case, of a continuing character, waiver of the forfeiture up to a particular day cannot be relied upon as a defence to an action for ejectment in respect of a subsequent breach. The reason for this is simply that, as there is a continually recurring cause of forfeiture, a new right arises each day that the breach continues, and the landlord’s waiver of a prior right cannot prejudice him or preclude him from taking advantage of a new and subsequent right. It has further been held . . . that the mere acceptance of rent which becomes due pending a notice to repair is no waiver of a subsequent forfeiture occasioned by non-compliance with such notice.”
Andrews L.J. then cited three authorities which he stated had –
“. . . decided that in the case of a continuing breach a second notice need not be given in respect of non-repair existing at the expiration of the time specified in the notice, for the breaches during the latter period are the same as those in respect of which the notice was given.”
33. As is noted in Wylie on Landlord and Tenant Law, 3rd Ed., at para. 24.27, there is one major limitation on the operation of the doctrine of waiver in Ireland, as was recognised in the McIlvenny case, and that is that by virtue of s. 43 of Deasy’s Act a waiver is ineffective between a landlord and tenant unless it is signified by the landlord or his authorised agent “in writing under his hand” in the case of a lease granted after 1860. Wylie states that, notwithstanding the doubts which have been expressed in the past as to the scope of this provision, there seems to be no reason why on its wording the section should not apply to both a “general” waiver of the covenant as a whole and a waiver of a particular breach of covenant, citing judgment of McCracken J. in Crofter Properties Ltd. v. Genport (High Court, Unreported, 15th March, 1996). That limitation is of no relevance here because, whatever its true construction, the first letter of 19th May, 2000 was written by the authorised agent of the Minister.
34. Even though the first letter of 19th May, 2000 from the Minister’s Department made no reference to the forfeiture notice, it seems to me that it is implicit in it that the forfeiture notice was being overridden, given that the actual notice given by the Minister in the forfeiture notice was that, unless the breaches of covenant itemised in the forfeiture notice which were capable of remedy were remedied within a reasonable time of service of the notice and compensation paid to the Minister, the Minister would exercise his right of re-entry and forfeit the Foreshore Lease. The first letter of 19th May, 2000 authorised Figary to commence works on the demised foreshore forthwith subject to immediate written confirmation by it of acceptance of the four conditions set out in the letter. It defies reason and credibility that it could have been the understanding of the Minister and his agents that Figary would undertake the obligations to be imposed by the four conditions stipulated, not to mention incurring the expenditure involved in commencing and implementing the works on the demised foreshore, if the forfeiture notice was to remain in place and was to hang over Figary “like a sword of Damocles”, as an official of the Minister’s Department testified in the High Court. The acceptance by Figary of the four conditions stipulated by the Minister was immediately confirmed by Galbraith and immediately thereafter the Minister’s Department reiterated that, on foot of that undertaking, Figary was authorised to commence works on the site forthwith and it was confirmed that the Foreshore Lease was active. The only sensible interpretation of the statement that the Foreshore Lease was active is that it was not at risk of forfeiture in the future in consequence of any previous breach of covenant by Figary, which had been the subject of the forfeiture notice, whether continuing or otherwise.
35. This is not a case in which the Court was asked to infer from the conduct of the parties that the forfeiture notice had been waived or abandoned, nor is it a case in which the Court is required to consider whether a continuing breach of covenant, for example a breach of covenant which is not remedied, would keep alive a forfeiture notice, notwithstanding acceptance of rent by the lessor. This is a case in which on 19th May, 2000 both the Minister and Figary committed in writing to new terms in relation to what counsel for the Minister correctly recognised as the dominant purpose of the Foreshore Lease, that is to say, the construction and operation on the demised foreshore of a marina. In so doing, the Minister recognised, through his authorised agent in writing, that the Foreshore Lease was “active”, which can only mean that it had not been determined and it was not at risk of being determined in consequence of past events. That does not mean, of course, that circumstances could not arise in the future which would give rise to an entitlement on the part of the Minister to invoke the proviso for forfeiture in the Foreshore Lease in the event of a breach of covenant by Figary. However, in such circumstances, the Minister would be required by subs. (1) of s. 14 to serve a new forfeiture notice on Figary, which complied with the requirements of that sub-section.
36. Having regard to the foregoing, I have no doubt that, as and from 19th May, 2000, the forfeiture notice had ceased to affect the landlord and tenant relationship of the Minister and Figary and that the trial judge was correct in finding that the Minister could not rely on it to seek to determine the Foreshore Lease by forfeiture and obtain possession of the demised foreshore as the Minister, relying on what was very much a “fallback” position in these proceedings as initiated in October 2005, subsequently sought to do. Accordingly, I am satisfied that, in consequence, the Minister was not entitled to an order for possession on the basis that the Foreshore Lease had been forfeited when the proceedings were initiated, nor is he entitled to an order for possession on that basis now.
37. On the basis of the conclusions that the forfeiture notice ceased to have effect in May 2000 and that the Foreshore Lease has not been determined by forfeiture on foot of the forfeiture notice, the question whether Figary is entitled to relief against forfeiture under s. 14(2) of the Act of 1881 does not arise. However, as has been noted, the trial judge did indicate that, even if it could not be held that the forfeiture notice ceased to have effect, he would have been disposed to grant relief against forfeiture having regard to general equitable principles. Before considering the plaintiff’s claim under s. 52 of Deasy’s Act, it is convenient to set out in summary form the terms upon which in the Second Judgment the trial judge considered it appropriate that Figary should be granted relief against forfeiture. Those terms, as set out at para. 79 and reiterated at para. 101(3), were as follows:
(a) that Figary pay all rent due and owing to the Minister, together with interest, in the total sum of €212,909.65 (the calculation of which sum will be explained later), with such liability being subject to set-off against any sum due by the Minister to Figary under the counterclaim;
(b) that Figary provide an updated Schedule of Works and detailed drawings, plans and technical specifications with regard to the breakwaters and the marina facilities, all by reference, inter alia, to a new clause to be inserted in the lease, the text of which is set in para. 70 of the Second Judgment;
(c) that Figary would retain Consulting Engineers of suitable speciality and skill, such as Arup, at whose direction and under whose supervision the remaining works necessary to fully complete the marina were to be carried out; and,
(d) that Figary would apply and lay out the sum of €1,545,000 awarded to it on the counterclaim, the quantification of which will be explained later, or its equivalent, solely and exclusively in satisfactorily completing the Marina in accordance with the parties' contractual relationship with each other.
In the interests of clarity, it should be recorded that the conditions for relief against forfeiture as set out in the final perfected order of the High Court dated 27th January, 2012 vary somewhat from the foregoing, in that there is included a condition that Figary “procure a bond . . . in accordance with the agreement of 19th May 2000”, the terms of which were stipulated. Such inclusion would appear to be a mistake, in that the requirement to procure a bond was pursuant to a separate and distinct order provided for at para. 101(4) of the Second Judgment. It will be necessary to consider later to what extent the foregoing terms should be applied as a condition to Figary avoiding an order for possession under s. 52 of Deasy’s Act.
Claim for order for possession under Section 52 of Deasy’s Act
38. The Minister’s claim for an order for possession has been quoted earlier (at para. 7). Notwithstanding the actual wording of the claim, my understanding is that the claim for possession was on two separate grounds:
The Minister’s claim under Deasy’s Act is addressed at paras. 121 to 129 of the First Judgment. Insofar as it is relevant for present purposes, s. 52 provides as follows:
“Whenever a year’s rent shall be in arrear in respect of lands held under any . . . lease . . ., 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 . . ., to proceed by ejectment for the recovery of the possession of the said lands . . ..”
Obviously, the first question which arises on the application of s. 52 is whether there was a year’s rent under the Foreshore Lease in arrear when proceedings were initiated in October 2005. In the statement of claim it was pleaded that up to and including 1st June, 2005 rent aggregating €251,460 remained due and owing to the Minister and that the arrears were continuing. In the defence it was denied that the said sum or any part thereof was due and owing to the Minister. It was also pleaded that, by reason of a variety of circumstances, Figary had no liability for rent. For example, it was pleaded that in or about February 1998 the Minister had entered into an agreement with Figary to remit and/or waive the rent. An alternative assertion was that the Minister had represented and warranted to Figary that he would remit and/or waive the rent and that, because Figary relied on the asserted representations or warranties to its detriment, the Minister was estopped from asserting that there was rent due. Those matters are addressed at para. 123 of the First Judgment. The conclusion of the trial judge was that the rent began to be due under the Foreshore Lease from 1993. There is no cross-appeal against that finding.
39. The build up of the calculation of the sum of €212,909.65 referred to in paras. 79 and 101(3) of the Second Judgment is to be found in para. 58 of the Second Judgment, where it is set out in tabular format. Based on a portion of a table, which had been submitted on behalf of the Minister, it is clear that the figure of €212,909.65 was calculated on the following bases:
(a) that, when the proceedings were initiated in October 2005 the rent due prior to 1st January, 1999 was statute-barred, so that the rent payable was calculated from 1st January, 1999 up to and including 1st January, 2011 at the yearly rate of €22,855.29, making in total €297,118.77;
(b) that of the amount payable over that period, a balance of €161,038.71 remained outstanding, the remainder of the rent payable from 1st January, 1999 having been paid by Figary to the Minister prior to the commencement of the hearing in the High Court in 2009; and
(c) that the additional amount of €51,870.94 represented interest at the rate of 8% per annum, that is to say, at the statutory court rate, on payments outstanding over that period, having given credit for the payments made.
40. The trial judge addressed the issue as to whether the Minister was entitled to interest on outstanding rent and, if so, at what rate in the Second Judgment (at paras. 59 to 62). His conclusion was that the question of interest would be more appropriately dealt with in the context of the forfeiture issue. Later in the Second Judgment (at para. 78) it was determined that it was appropriate to provide for interest on the outstanding rent at the rate of 8%, the only rate which had been suggested, in the context of determining the conditions on which Figary would get relief against forfeiture.
41. As I understand the position, although Figary has retained possession of the foreshore demised by the Foreshore Lease, it has paid no rent to the Minister since the determination of the proceedings in the High Court. On the basis of the tables furnished to this Court, there is due to the Minister in respect of arrears of rent up to and including 1st January, 2014 the sum of €229,604.64. This Court was informed that simple interest calculated at 8% per annum on the cumulative amount outstanding comes to €98,670.65. Accordingly, the sum due for rent under the Foreshore Lease and interest thereon, as calculated in the same manner as the figure of €212,909.65 was arrived at in the Second Judgment, is €328,275.29 based on arrears due at 1st January, 2014. As that calculation obviously requires to be updated, on the same basis, but for illustrative purposes only, I calculate the amount due as at 1st January, 2015 at €369,498.95, made up of –
42. There is no doubt but that a year’s rent was in arrears when the proceedings were initiated. The Minister, again as a “fallback”, had sought an order for possession under s. 52 of Deasy’s Act. Accordingly, the following issues require to be addressed:
(a) whether the doctrine of equitable relief against forfeiture applies when a landlord is otherwise entitled to recover possession of premises under s. 52 of Deasy’s Act, when a year’s rent is in arrears, and
(b) if so, the application of the doctrine to the position of Figary in this case, given the conclusion that the issue of statutory relief against forfeiture under s. 14(2) of the Act of 1881 does not arise.
43. As is pointed out in Wylie on Landlord and Tenant (3rd Ed.) at para. 24.20, where forfeiture (i.e. contractual forfeiture based on a proviso for re-entry in the lease) is based upon non-payment of rent, there is equitable jurisdiction to grant relief against forfeiture. As is pointed out in footnote 159, statutory relief against forfeiture provided for in s. 14 of the Conveyancing Act 1881 does not apply in the case of forfeiture for non-payment of rent, because, as already noted, s. 14(8) provides that s. 14 “shall not affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent”.
44. Section 52 of Deasy’s Act provides for a special action for ejectment for non-payment of rent whenever a year’s rent shall be in arrear. In Deale on The Law of Landlord and Tenant in Ireland, it is pointed out (at p. 262) that “non-payment of rent” in s. 14(8) of the Act of 1881 means the contractual right to forfeit for failure to pay rent, and not the right to eject for non-payment of rent under Deasy’s Act, section 52.
45. Wylie deals with proceedings under s. 52 in Chapter 27 (op. cit.) in some detail. He observes (at para. 27.19) that an ejectment for non-payment of rent is primarily a proceeding to enforce payment of rent under a tenancy which still exists, but with the possibility that an order for possession will be made, if the rent is not forthcoming. At para. 27.31 he deals with s. 60 of Deasy’s Act, which provides that the proceedings are stayed, if the defendant pays the amount of rent claimed plus costs, to the plaintiff or his agent within ten days from the service of the proceedings. He points out that apart from that, at any time before service of notice of trial or judgment, the defendant can pay the sum for rent into court, with an undertaking to pay costs, and thereafter the plaintiff proceeds “at his peril” (s. 62 of Deasy’s Act). Wylie also points out (at para. 27.32) that, even where judgment has been given against the defendant, he may obtain a stay of execution by tendering at any time before execution the rent stated as due in the decree, plus costs and any expenses incurred towards execution. Wylie deals with ss. 70 and 71 of Deasy’s Act in paras. 27.33 to 27.38. The effect of those provisions is that the tenant may obtain “restitution”, i.e. an order restoring him to possession of the demised premises, if he tenders or lodges in court the arrears of rent, plus full costs, within six months after execution of the order for possession granted to the landlord. It is pointed out that the application should be made to the Court which made the order for possession.
46. Under the heading “Equitable Relief”, Wylie states (at para. 27.37) that, according to s. 71 of Deasy’s Act, the Court hearing the application may “give such relief therein as a court of equity might have done”. He observes that it seems clear, therefore, that the Court should exercise its discretion on usual equitable principles for giving relief against forfeiture and he refers to his earlier commentary (at para. 24.20). He goes on to state that, thus, the conduct of the parties may be relevant, e.g. the landlord’s refusal of a tender of rent, which necessitated an application for relief, may result in him being deprived of his costs. He also states that the form of order is usually that the tenant is to be restored to possession on the basis that he accounts to the landlord for the rent and costs and the landlord accounts for any profits he has made during his interim possession following execution of the original order for possession. Once made, the order for restitution is final.
47. Deale (op. cit) (at p. 260) emphasises that a proviso for re-entry if rent is unpaid should not be confused with the statutory right to eject for non-payment of rent which is a year or more in arrear contained in Deasy’s Act, s. 52. The statutory right exists “without any need for a proviso thereabout in the contract”. Such an ejectment is not a forfeiture. In relation to the provision in s. 71, which provides that it shall be lawful for the Court “to give such relief therein as a court of equity might have done”, Deale states in the notes on s. 71:
“Such relief would include an account of the landlord’s profits during the dispossession . . . , but the tenant may, unless he stipulates otherwise, find that an unconditional payment of rent and costs has waived such an account . . ..”
48. Having regard to the foregoing, I consider that the jurisdiction of a court under s. 71 to “give such relief therein as a court of equity might have done” in a situation where the tenant has continued in possession of the demised premises relates to ensuring that the balance of fairness and justice is maintained between the landlord and the tenant in relation to the landlord’s monetary entitlements and the tenant’s monetary liabilities in respect of unpaid rent, i.e. arrears of rent and costs, and possibly interest on the arrears. Where, as in this case, the landlord contends that the tenant is in breach of certain covenants in the lease, on foot of which forfeiture is governed by s. 14 of the Act of 1881, but the Court concludes that the circumstances are such that the landlord is not entitled to forfeit under s. 14, for example, because, as has happened here, the forfeiture notice has been waived, I am of the view that the Court does not have jurisdiction to make it a condition of the tenant avoiding an order for possession under s. 52 that, in addition to paying the rent in arrears and perhaps interest on the arrears of rent and costs, the tenant is obliged to remedy the breaches of covenant which come within the ambit of s. 14. If it were otherwise, the landlord could totally ignore the requirements of s. 14 and proceed for ejectment under s. 52 in the hope of not only recovering the rent arrears but also having the breaches of covenant remedied.
49. For the foregoing reasons, given the conclusion that the forfeiture notice had ceased to affect the landlord and tenant relationship of the parties prior to the initiation of the proceedings, so that the Minister is not entitled to forfeit the Foreshore Lease and relief against forfeiture under s. 14(2) of the Act of 1881 does not arise in these proceedings, I consider that it is not open to the Court to impose the requirements set out in the Second Judgment at para. 101(3), namely, –
(a) at sub-paragraph (ii), providing an updated schedule of works,
(b) at sub-paragraph (iii), retaining consulting engineers, such as Arup,
(c) at sub-paragraph (iv), applying any award of damages under the Interreg IIIA claim in completing the Marina,
as conditions to refusing the Minister’s claim for possession under s. 52 and allowing Figary to continue in possession for the residue of the term subject to the provisions of the Foreshore Lease.
50. If Figary discharges the arrears of rent and, if the Court concludes that it should do so, interest on the arrears of rent and the costs in relation to the s. 52 application, the correct outcome on foot of the s. 52 claim is that an order for possession under that statutory provision is not made and the lease continues to exist. That gives rise to the following considerations:
(a) In relation to arrears of rent, as the objective of proceedings under s. 52 is primarily to enforce payment of the rent due by the lessee to the lessor, whether the reference to rent in the various provisions of Deasy’s Act which are designed to avoid an order for possession or to restore the lessee to the demised premises (for example, the reference to “the rent, arrears and costs” in s. 71) should be construed as referring to all arrears of rent, whether statute-barred or not, due when the proceedings were commenced and arrears of rent which have accrued since the proceedings were initiated. As the statutory remedy provided for in s. 52 envisages all outstanding rent being discharged in order for the tenant to avoid the making of an order for possession against him, the proper application of principles of fairness and justice does seem to require that rent which is statute-barred when the proceedings are initiated should be paid in order to achieve that end. My calculation, again for illustrative purposes only, of the arrears of rent for the period from the commencement of the term of the Foreshore Lease to 1st January, 1999 is that they amount to €76,055. 29.
(b) In relation to interest on arrears of rent, the Court has not been referred to any authority in which payment of interest at the statutory court rate on the arrears was imposed on the defaulting lessee as a condition to avoiding an order for possession under s. 52. Nonetheless, the proper application of the principles of fairness and justice does seem to require that Figary should pay interest at the statutory court rate, that is to say, 8%, on arrears of rent which are not statute-barred. In my view, it is appropriate for the Court to exercise its discretion in this manner because Figary has continued in possession of the Marina without paying the outstanding rent as it became due for such possession to the Minister. If the Court was, for example, giving judgment in summary proceedings for the arrears of rent due to the Minister, in my view, it would be appropriate to award pre-judgment interest under s. 22 of the Courts Act 1981 to the Minister. The Minister’s case for interest at the statutory court rate is even stronger, where the Court is giving Figary relief in the nature of avoidance of an order for possession.
(c) On the calculations set out in para. 31 and at (a) above, there is due by Figary to the Minister as at 1st January, 2015 the following sums:
(i) €76,055.29 in respect of statute-barred arrears of rent up to 1st January, 1999;
(ii) €252,459.93 in respect of arrears of rent from 1st January, 1999 to 1st January, 2015; and
(iii) interest in the sum of €117,039.02 on the arrears of rent which are not statute-barred.
The total amount due for arrears of rent and interest, therefore, is €445,554.24. As stated previously, those updating calculations have been done for illustrative purposes only. Obviously, in the event of any dispute as to the accuracy of the calculations, the Court will hear submissions from the parties and also as to any further updating as may be necessary.
(d) In relation to the costs of the Minister’s claim under s. 52, that claim being one component only of these very complex proceedings, the relevant measure of costs will be considered after hearing further submissions from the parties.
Provided Figary discharges the arrears of rent to date, interest at the statutory court rate of 8% on the arrears of rent which are not statute-barred, and the s. 52 claim for possession component of the costs of the proceedings as measured, the Minister will not be granted an order for possession under s. 52 of Deasy’s Act.
Other issues arising from landlord and tenant relationship: general approach
51. The issues which remain on the appeal arising from the landlord and tenant relationship of the Minister and Figary arise from the findings of the trial judge on certain claims made by Figary in its counterclaim against the Minister on the basis of alleged breaches of covenant by the Minister, which breaches it was asserted constituted a breach of implied term not to derogate from the grant, and in respect of which Figary claimed damages. The simplest way of dealing with those issues is by reference to the Minister’s grounds of appeal and to subsume them under the headings suggested by counsel for the Minister. Accordingly, the Court will consider those issues under the following headings:
(a) the liability of the Minister to assist Figary in relation to the development of the marina;
(b) the liability of the Minister for alleged unreasonable withholding of consent in relation to removal of sand; and
(c) liability of the Minister for alleged unreasonable withholding of consent by the Minister in relation to the performance bond.
While the trial judge found that there was liability on the part of the Minister to Figary under the foregoing headings, following a very thorough analysis of the law and the facts, he concluded that the Minister was not liable in damages to Figary for the breaches he found on the part of the Minister. In short, Figary was not awarded any relief against the Minister on the counterclaim under those headings. However, on the appeal, the Minister has taken issue with one aspect of the reasoning of the High Court in determining whether damages would be recoverable by Figary against the Minister for breach of covenant. In addressing the issues raised by the Minister as outlined at (a), (b) and (c) above, the basis on which it was submitted that they are of significance, and not merely theoretical, will be outlined.
52. Finally, in addressing many of the issues arising from the parties’ landlord and tenant relationship, counsel for the Minister emphasised the fact that the Foreshore Lease was a lease of foreshore granted pursuant to s. 2 of the Act of 1933. It was submitted that sufficient consideration was not given by the trial judge to the public interest aspect of the landlord and tenant relationship arising from the legislation governing the State’s ownership of foreshore and the powers of the Minister to act in a manner proper or desirable in the public interest. That issue will be considered separately.
Liability of the Minister to assist Figary in relation to the development of the marina
53. In the First Judgment, before considering individually the allegations of breach of covenant made by Figary against the Minister, the trial judge took an overview of Figary’s case for breach of covenant against the Minister. Figary, while not having admitted that it was in breach of covenant, asserted that any such breach was due in whole or in part to the conduct on the part of the Minister, in particular, the Minister having unreasonably withheld its consent or otherwise placed unreasonable conditions upon its receipt. It was recorded, however, that no provision in the Foreshore Lease stated expressly that the Minister’s consent “would not be unreasonably withheld”. The trial judge, nonetheless, continued his overview on the premise that the Minister may not rely on breaches of covenant by Figary, which have occurred in whole or in part due to the Minister’s wrongful actions, such as unreasonably withholding consent, to effect ejectment and, further, that Figary may have an entitlement to damages in consequence thereof. It is appropriate to reiterate at this juncture that this Court has concluded that the Minister is not entitled to eject Figary. Further, the High Court found that Figary was not entitled to any damages for breach of covenant or of contract on its counterclaim against the Minister.
54. In taking an overview of Figary’s contention of breach of covenant on the part of the Minister, the trial judge (at para. 141) recognised that the parties’ relationship was somewhat fraught. He made the following observation in relation to the position of the Minister:
“. . . it is clear from correspondence that the positive assistance expected of and from the [Minister] ceased, and this assistance itself declined and also ceased (in fact it becoming negative). Further the [Minister] at times put in place barriers to the completion or continuance of the project, and it took an approach to its dealings with [Figary] which, on one reading, was obstructionist, or at the very least unhelpful.”
55. The Minister in his grounds of appeal contends that the trial judge erred in law and on the facts in concluding that –
56. Counsel for Figary submitted that the findings the subject of the challenge at (b) in the next preceding paragraph are findings of primary fact and/or inferences of fact based on credible evidence, including, in particular, relevant correspondence, in respect of which the principles laid down by this Court in Hay v. O’Grady [1992] 1 I.R. 210 apply. While acknowledging that the findings at the end of para. 141, which have been quoted above, were introductory in character and were qualified as being “on one reading of events”, counsel for Figary submitted that they ought not be set aside by this Court on appeal.
57. The reality of the situation is that the trial judge only upheld two of Figary’s allegations of breach of covenant against the Minister. In the circumstances, it seems to me that the proper course for this Court to take is to consider, in relation to each of those covenants, the basis on which it was found that the Minister was in breach.
Liability of the Minister for unreasonable withholding of consent in relation to removal of sand
58. In dealing with the refusal of the Minister to consent to the removal of sand, the trial judge (at para. 143) identified the relevant covenant on the part of Figary in the Foreshore Lease as covenant No. 10 in which Figary covenanted:
“To obtain the written consent of the [Minister] for the excavation, removal and stockpiling of beach material and the [Minister] shall specify the terms and conditions under which such excavation, removal and stockpiling will be permissible.”
The trial judge concluded (at para. 143), having reviewed the correspondence, that ultimately such consent was unreasonably withheld by the Minister. The trial judge rationalised that conclusion in that paragraph and in the succeeding paragraph and he identified the consequence of the refusal of consent by the Minister to allow the removal of sand as being that Figary was entitled to such damages as were appropriate in the circumstances and resultant thereon. In the event, in the Second Judgment, it was held that Figary was not entitled to damages and there is no cross-appeal against that finding.
59. The grounds on which the Minister challenges those findings are that the trial judge erred in law and on the facts –
(a) in concluding that the Minister had unreasonably withheld his consent under covenant No. 10 of the Foreshore Lease for the removal of beach material/sand;
(b) in determining that it was not for the Minister and/or that it was unreasonable for the Minister to require Figary to produce evidence of appropriate permits or licences for the removal and/or transportation of sand or beach material before giving its consent for the purposes of covenant No. 10 of the Foreshore Lease;
(c) in determining that it would have been sufficient for Figary to undertake to the Minister to obtain relevant licences and/or permits in respect of the removal and transportation of sand or beach material for a consent to be provided for the purposes of covenant No. 10 of the Foreshore Lease; and
(d) in determining that the Minister was in any way in breach of covenant in unreasonably withholding consent for Figary to move sand off the site for use elsewhere.
60. In their submissions in this Court, counsel for the Minister pointed to the Minister’s statutory obligations under the Act of 1933, as amended, and, in particular, the public interest in relation to the grant of leases of foreshore. It was also pointed out that covenant No. 10 was only one of the covenants among the covenants on the part of Figary in the Foreshore Lease which addressed the issue of waste in the context of the construction and the operation of the Marina. They pointed to courses of action which could have been, but were not, taken by Figary to deal with beach material.
61. Counsel for Figary’s response is that the findings made by the trial judge are findings of primary fact and/or inference of fact based on extensive and credible evidence which were correct.
62. There was extensive evidence, both oral evidence and contemporaneous documentary evidence, before the High Court in relation to the interaction between Figary, qua lessee, and the Minister, qua lessor, in relation to the excavation and disposal of sand and beach material. Given that notwithstanding the finding that the Minister, qua lessor, acted unreasonably, and further, given that the finding of the trial judge resulted in no remedy in favour of Figary against the Minister, so that this aspect of the counterclaim can have no practical impact on the outcome of the appeal, and having regard to the limited function of this Court under the Hay v. O’Grady principles in this area, it would serve no useful purpose to review the evidence with a view to determining whether the conclusions of the trial judge were incorrect on the bases alleged on behalf of the Minister. Therefore, I consider that it is neither necessary nor appropriate to consider these grounds of appeal any further.
Liability of the Minister for unreasonable withholding of consent in relation to the performance bond
63. If anything, the issues raised in relation to the bond to be provided by Figary in accordance with its obligation under the Foreshore Lease and the Minister’s treatment of the endeavours of Figary to fulfil its obligation are even more complex than the removal of sand problem. The covenant by Figary in the Foreshore Lease under which the obligation to produce a bond arose was covenant No. 12 under which Figary undertakes as follows:
“To restore the foreshore to its former condition to the satisfaction of the [Minister] in the event of the premature termination or abandonment of the works specified in the Second Schedule. To ensure that [Figary] will be in a position to comply with this condition it shall, if so required by the [Minister] procure a Bond from an Insurance Office of repute carrying on business in Ireland in the sum of £250,000 for the due performance by [Figary] 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 [Figary] and shall be assigned to the [Minister] if so required. [Figary] will furnish such Bond to the [Minister] for inspection, if required.”
A factor which complicates the bond issue is that, as has been outlined earlier, one of the conditions imposed upon and accepted by Figary in the correspondence dated 19th May, 2000 referred to earlier was –
“the provision of a performance bond of suitable duration which specifies the cover of all of the works set out in the schedule of works to be agreed.”
As the trial judge pointed out in the First Judgment (at para. 146), the “performance bond” envisaged in that correspondence was of an entirely different nature to the bond envisaged in covenant No. 12 which, it was stated might be termed a “remedial” or “restorative” bond. The trial judge concluded that the requirement of covenant No. 12 was modified by the correspondence of 19th May, 2000 in relation to which, in the course of the parties’ interaction, the Minister required that the bond be payable on demand and that there be no recourse to arbitration in the event of a call for payment. It was insistence on those two requirements that the trial judge (at para. 149 of the First Judgment) found to be unreasonable, on the basis that it would be impossible to obtain a bond embodying these terms.
64. The outcome of the counterclaim in relation to the bond issue was that in the Second Judgment (at para. 101(4)), the trial judge indicated that he would make an order in the following terms:
“An Order directing [Figary] to procure a Bond in favour of the [Minister], in accordance with the agreement of the 19th May 2000, in the sum of €317,434.52, of suitable duration and which covers all works set out in the Schedule of Works to be agreed, the general terms of which are to reflect existing commercial construction norms.”
As indicated earlier in the interests of clarification, in the perfected order of the High Court that direction is made a condition of the granting of relief against forfeiture, which would appear to be a mistake in the order. Counsel for the Minister, both as a ground of appeal, and in their submissions, challenged the determination that the two requirements insisted upon by the Minister were unreasonable and that the Minister was in breach of covenant in unreasonably withholding consent in relation to the bond. However, as in the case of the finding of a breach of covenant No. 10, given that the finding of the trial judge was that this breach did not give rise to an entitlement to damages and that relief against forfeiture is not being granted on this appeal, the finding has no practical implications, subject to one qualification. Accordingly, I consider that it is neither necessary nor appropriate to consider this ground of appeal further.
65. The qualification is that, while the direction to procure the bond quoted in the next preceding paragraph is expressed as a condition of granting relief against forfeiture in the perfected order of the High Court, the reference to an order directing Figary to obtain a bond in para. 101(4) of the Second Judgment appears to be a standalone direction, rather than a condition of relief against forfeiture. If one assumes that the perfected order is correct, then that the direction to procure the bond will fall away on relief against forfeiture ceasing to be relevant. However, if the perfected order is not correct in this regard, the Court will have to hear further submissions from the parties as to how it is to be dealt with in the order of this Court. It is hoped that the parties will reach consensus on the approach to be taken.
Whether the Minister is liable for damages for breach of covenant/breach of contract
66. In the Second Judgment, in addressing the issue of damages arising from his finding of breach of covenant by reference to unreasonable withholding of consent and/or placement of unreasonable conditions on such consent, the trial judge considered an argument advanced on behalf of the Minister that, as a matter of legal principle, on the authority of the decision of this Court in Meagher v. Luke J. Healy Pharmacy Ltd. [2010] 3 I.R. 743 (Meagher), no cause of action sounding in damages had been established. Having considered the nature of the landlord and tenant relationship arising between the parties under the Foreshore Lease, the trial judge concluded in the Second Judgment (at para. 36) that, given its nature, the Meagher decision had no application to the covenants and conditions in the Foreshore Lease with which he was concerned, namely, covenant No. 10 in relation to removal of sand and covenant No. 12 in relation to the provision of a bond. On the basis of further analysis of those provisions of the Foreshore Lease, he concluded (at para. 38) that covenant No. 10, which on its face is a covenant by Figary qua lessee, includes a positive covenant on the part of the Minister qua lessor by reference to his obligation to “specify the terms and conditions under which such excavation, removal and stockpiling will be permissible”, the breach of which positive covenant in principle is actionable in damages. By contrast, he found that the unreasonable conduct on the part of the Minister in relation to the procurement of the bond, which he considered constituted a breach of contract, did not give rise to any entitlement to damages. However, even though he found that the breach of covenant No. 10 in principle was actionable in damages, as has been outlined earlier, ultimately, the trial judge awarded no damages whatsoever to Figary for the Minister’s breach of covenant in relation to the removal of sand. Although he expressed the view in the Second Judgment (at para. 54) that he was satisfied that the conduct of the Minister “might have given rise to some loss of earnings post-2005”, he was of the view that any such loss was more properly attributable to the inability of Figary to access funds under the Interreg IIIA Programme. Therefore, he stated (at para. 55) that any damages for loss of earnings would be dealt with under Figary’s counterclaim in connection with the Interreg IIIA Programme.
67. The Minister has challenged the findings the trial judge made on the issue of damages for breach of covenant in two respects. First, it is the Minister’s position that the trial judge erred in determining that the position of this Court in Meagher was distinguishable from the circumstances of the present case and that damages were recoverable by Figary for breach of covenant on the part of the Minister. Secondly, it is the Minister’s position that the trial judge erred in his interpretation of covenant No. 10 as giving rise to a positive obligation on the part of the Minister and not a mere refinement of the obligations of Figary (so as to inform Figary of what was required of it in relation to its obligations under the Foreshore Lease).
68. Again, neither of the challenged findings ultimately gave rise to an award of damages in favour of Figary against the Minister, nor did either have any implications in relation to the overall outcome of the proceedings in the High Court. Moreover, there is no cross-appeal by Figary against the determination that no damages should be awarded to Figary for breach of covenant. In the circumstances, it is not necessary, and it would be a futile exercise, for this Court to consider the damages issue any further.
Public interest issue
69. A theme which runs through the submissions made on behalf of the Minister in relation to the issues arising under the landlord and tenant relationship of the parties is that the trial judge failed to have sufficient regard to the public interest nature of the Minister’s position. In particular, one ground of appeal relied on by the Minister is framed as an assertion that the trial judge erred in treating the relationship between the Minister and Figary as an ordinary commercial landlord and tenant relationship and in treating the obligations of Figary under the Foreshore Lease as being similar to obligations under a building contract and, in so doing, failing to take proper account of the statutory role of the Minister in relation to foreshore under the Act of 1933, as amended, particularly the requirements for leases of the foreshore to be granted in the public interest.
70. In relation to that ground, it seems to me that one must assume that, in granting the Foreshore Lease to Figary, the Minister considered that it was in the public interest to grant a lease of the demised foreshore to Figary and that he was also satisfied that the terms of the Foreshore Lease complied with the statutory requirement of the protection of the public interest. In this context, counsel for the Minister made some sweeping assertions as to how a court should treat the landlord and tenant relationship in the context of a lease of foreshore made on the authority conferred by the Act of 1933, as amended. The primary target of those assertions is the circumstance that the trial judge was prepared to grant relief against forfeiture on certain conditions. Having found that the Foreshore Lease has not been forfeited, that aspect of the outcome in the High Court decision is no longer effective. In all those circumstances, the submissions made on behalf of the Minister as to the impact of the public interest aspect of leases of the foreshore on relief against forfeiture address a hypothetical situation. The issues they raise are for another day.
Summary of conclusions on the landlord and tenant relationship
71. The Minister is not entitled to an order for possession for recovery of the demised foreshore on the basis that he is entitled to enforce forfeiture of the Foreshore Lease under the proviso for forfeiture in the event of breach of covenant in the Foreshore Lease. Accordingly, the question of granting relief against forfeiture does not arise.
72. Provided Figary discharges the arrears of rent due to the Minister and interest thereon at the statutory court rate calculated on the basis outlined earlier and the costs of the Minister related to the claim for possession under s. 52 of Deasy’s Act, the basis of quantification of which will be subject to further submissions, the Minister shall not be entitled to an order for possession of the demised foreshore under s. 52 of Deasy’s Act. Of course, assuming compliance by Figary with those conditions, the landlord and tenant relationship of the Minister and Figary will continue to exist unless and until the Foreshore Lease is terminated. The obligations of Figary, qua lessee, and of the Minister, qua lessor, in accordance with the terms of the Foreshore Lease will continue. One would hope that a more common-sense approach is adopted on each side in the future in relation to performance of their respective obligations under the Foreshore Lease.
Claim for trespass
73. Although this aspect of the Minister’s claim does not strictly speaking arise out of the landlord and tenant relationship, it is convenient to deal with it at this juncture.
74. As has been recorded earlier, it was pleaded in the statement of claim that Figary effected an encroachment beyond the demised foreshore in the construction of the Marina. It was also pleaded that Figary proposed effecting other works outside the demised foreshore. It was pleaded that the works in question amounted to an unauthorised act creating a permanent trespass by encroachment. Specific injunctive reliefs were sought by the Minister against Figary in relation to that alleged trespass: prohibitory injunctions restraining Figary from carrying on any works otherwise than within the boundaries of the demised foreshore and from encroaching on adjoining foreshore. The Minister also sought a mandatory injunction demanding Figary to remove and take away all structures as project beyond the boundaries of the demised foreshore. There was also a claim for damages for trespass. In its defence Figary denied trespass and it pleaded that it had taken meticulous steps to remain within the boundaries of the demised foreshore.
75. The trial judge found in the First Judgment (at para. 157) that there had been a technical trespass. The trial judge then went on to explain the position he proposed adopting (at para. 158) as follows:
“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 (sic) should be agreed, or, in default of agreement, determined by this Court.”
76. The quantification of damages for trespass is addressed in the Second Judgment (at paras. 80 to 86). In relation to the historical trespass over an area of approximately 0.484 hectares of foreshore, the trial judge calculated the damages for trespass, to include interest at 8% per annum, in the amount of €13,938.12. He recorded at para. 86 that the plaintiff had agreed that the encroached on area should be demised to Figary on the same terms and conditions as the Foreshore Lease, subject to increased rent calculated pro rata on the existing rent. The trial judge calculated the new composite yearly rent at €23,961.49. In the perfected order of the Court, having recorded that it was ordered that Figary was entitled to relief against forfeiture, it was ordered that the Minister –
“is required to enter a new Lease on the same terms as the previous Lease which is to cover an increased area of demise, the full extent of which is now outlined in red on the drawing attached herewith, and which is demised on the basis of an increased rent of €23,961.49 per annum (to cover both the original area of demise in addition to the extra area of .484 Ha included in the said drawing) . . ..”
77. None of the findings or determinations of the High Court in relation to the claim for trespass and encroachment are the subject of the appeal. They are outlined in this judgment purely for the purpose of completeness and emphasising that they remain in effect. However, having heard further submissions from the parties, the Court will have to give consideration as to how the orders made by the High Court in relation to these matters are to be dealt with in the order of this Court and, in particular, to what extent the orders of the High Court need to be varied or vacated. For instance, it is ordered in the final order of 27th January, 2012 that the Minister enter into a new lease in favour of Figary to include the encroached on area of the foreshore, the proposed new demised area being depicted by reference to a map annexed to the order, subject to Figary being liable for an increased rent of €23,961.49 per annum. It is hoped that the parties will reach consensus as to continuing status or otherwise of that order.
C – Grant application under Interreg IIIA Programme Issues
Figary’s claim arising from the grant application
78. To recapitulate, Figary has included in its counterclaim a claim for damages for breach of statutory duty on the ground that the Minister wrongfully frustrated Figary in its endeavours to develop the Marina, the relevant wrongful conduct being particularised as preventing Figary from seeking funding under the Interreg IIIA Programme and failing to reasonably assist Figary in obtaining such funding. In order to put Figary’s application for the grant in issue and the manner in which it was processed into its legislative context, both under European Union law and under Irish law, and to understand the administrative framework within which it was submitted, it is necessary to outline the EU and national legislative and the administrative structure applicable to the Interreg IIIA Programme as it operated in this jurisdiction and, in particular, the elements of it relied on by counsel for Figary.
Legislative/administrative structure
EU legislation: Council Regulations
79. At the apex of the structure, although below the relevant Treaty provisions, is Council Regulation (EC) No. 1260/1999 of 21st June, 1999 (the General Regulation) laying down general provisions on the Structural Funds. As is predicted in the recitals therein, no less than fifty nine in number, the General Regulation is very broad ranging in its objective and scope. The focus for the purposes of the issues which arise on this appeal is on the provisions governing implementation.
80. In Article 8, having provided that Community actions shall complement or contribute to corresponding national operations and that the “partnership” between the Commission and the Member State, together with authorities and bodies designated by the Member State within the framework of national rules, shall cover the preparation, financing, monitoring and evaluation of assistance, it is provided in Article 8(3):
“In application of the principle of subsidiarity, the implementation of assistance shall be the responsibility of the Member States, at the appropriate territorial level according to the arrangements specific to each Member State, and without prejudice to the powers vested in the Commission, notably for implementing the general budget of the European Communities.”
The word “assistance” is defined in Article 9, the definition Article, as meaning “the forms of assistance provided by the Funds”, including operational programmes.
81. Programming is dealt with in Title II and “Operational programmes” are dealt with in Article 18. Article 18(1) provides that assistance covered by a Community support framework shall as a general rule be provided in the form of an integrated operational programme by region, as defined in Article 9. The expression “operational programme” is defined in Article 9(f) as meaning the document approved by the Commission to implement the Community support framework and the definition elaborates on the nature of the document. The prescribed contents of each operational programme are set out in Article 18(2). It contains provisions for implementing an operational programme, which it is stipulated shall include, inter alia, –
Article 9(n) defines “managing authority” as meaning any public or private authority or body at national, regional or local level designated by the Member State, or the Member State when it is itself carrying out this function, to manage assistance for the purposes of the General Regulation. It is provided that, if the Member State designates a managing authority other than itself, it shall determine all the modalities of its relationship with the managing authority and of the latter’s relationship with the Commission. Article 34 elaborates on the role of the managing authority in the context of monitoring. It provides that, without prejudice to Article 8(3), the managing authority as defined in Article 9(n), shall be responsible “for the efficiency and correctness of management and implementation”. Detailed particulars of the matters for which the managing authority bears responsibility follow in Article 34.
82. Article 18 also makes provision for a “programme complement”, which is defined in Article 9(m) as meaning –
“the document implementing the assistance strategy and priorities and containing detailed elements at measure level, as set out in Article 18(3), drawn up by the Member State or managing authority and revised as necessary in accordance with Article 34(3). It is sent to the Commission for information;”
The prescribed contents of the programme complement are set out in Article 18(3).
83. Various articles mandate the Commission to publish guidelines, for example, Article 10 and Article 15, and also Article 21(1), which is of relevance here and is referred to later. It is convenient to refer at this juncture to Article 15, which is headed “Preparation and approval”, in which the provisions in Article 18 in relation to operational programmes and programme complements are anticipated and which is the subject of a decision of the European Court of Justice relied on by the Minister and considered later (Italian Republic v. The Commission). In Article 15 it is provided that the Commission shall appraise the proposed operational programmes submitted by the Member States to determine whether they are consistent with the aims of the corresponding Community support framework and compatible with other Community policies (Article 15(4)). It is also provided that the Member State or the management authority shall adopt the programme complement defined in Article 9(m) and a time limit is stipulated for the Member State sending the programme complement to the Commission for information (Article 15(6)). It is clear from Article 15 that the Commission has a different function in relation to operational programmes, which it appraises, and programme complements, which are sent to it for information, a difference which is highlighted because of the Minister’s reliance on the decision in Italian Republic v. The Commission.
84. Article 20(1) provides that Community initiatives shall cover the four fields specified in that Article, the first of which is –
“cross-border, transnational and interregional cooperation intended to encourage the harmonious, balanced and sustainable development of the whole of the Community area”,
and is classified as “Interreg”, being a reference to interregional.
85. Article 21(1) provides that the Commission shall lay down guidelines describing for each initiative the aims, scope and appropriate method of implementation and that those guidelines shall be published in the Official Journal of the European Communities.
86. Commission Regulation (EC) No. 438/2001 of 2nd March, 2001, was the implementing regulation which was in force at the time relevant to the issues on this appeal. In Article 1 its function was stated as to lay down “detailed rules for the implementation of [the General Regulation] as regards the management and control systems for the assistance granted under the Structural Funds that is administered by The Member States”. It envisaged “intermediate bodies”, which were defined in Article 2(2) as meaning “all public or private bodies or services acting under the responsibility of managing or paying authorities or performing tasks on their behalf”. The provisions in relation to management and control systems outlined in Article 2 et seq. imposed on each Member State responsibilities not only in relation to managing authorities, but also in relation to intermediate bodies. While this regulation was, as counsel for Figary submitted, of significance in the present context, its significance was as part of the overall scheme.
National legislation
87. At national law level, the apex of the structure is the British-Irish Agreement Act 1999 (the Act of 1999), which gave effect to the Belfast Agreement of 10th April, 1998. Section 22 thereof identified a body known as “The Special EU Programmes Body” (the SEUPB), with the attributes of a body corporate, as the “implementation body for special European Union programmes”. Section 23 provided that the functions of the SEUPB would be the functions specified in Part 4 of Annex 1 to the Belfast Agreement. Part 4, the text of which is set out in Annex 1 to the Act of 1999, inter alia, provided that, in relation to post-1999 Structural Funds, the SEUPB would have grant-making and other managerial functions in respect of Interreg III. In effect, the SEUPB thereby became the managing authority.
SEUPB Operational Programme
88. The operational programme which is of relevance for present purposes is Interreg IIIA Programme 2000 – 2006 Ireland/Northern Ireland (the SEUPB Operational Programme). The SEUPB Operational Programme was adopted by the SEUPB and approved of by the Commission.
89. Chapter 13 dealt with managing and implementing provisions, being, as stated in para. 13.1, the provisions required under Community and national arrangements, including the General Regulation and Regulation 438/2001, and also the Guidelines for Interreg IIIA produced by the European Commission, to which reference is made below. The succeeding provisions of Chapter 13 were very detailed. Paragraph 13.4 provided that the SEUPB was to be the managing authority carrying out the functions laid down in Article 34 of the General Regulation. It was provided that the SEUPB would put in place adequate and appropriate procedures and arrangements to ensure compliance with the regulations referred to above and the relevant national requirements. Provision was also made for various bodies, apart from the managing authority, within the regulatory framework: the Joint Technical Secretariat (JTS), for which the managing authority (i.e. the SEUPB) would be responsible; the Programme Monitoring Committee; and the Steering Committee. It was also provided that a document setting out in detail “the Programme Strategy and Priorities”, that is to say, the Programme Complement, would be prepared by the SEUPB, as the managing authority, and submitted to the Programme Monitoring Committee for its approval and that it would also be submitted to the European Commission “for approval” (sic). Its contents were to be as defined in Article 18(3) of the General Regulation.
90. Chapter 13 also provided that the SEUPB, as managing authority, might delegate certain of its functions in relation to management of the assistance to implementing (sometimes referred to as implementation) bodies and it was provided that, in the event of such delegation, the implementing bodies would take reasonable steps to ensure that separate units within the organisation would carry out implementing functions and delegated functions. As regards project selection, it was provided that joint project development, assessment and selection processes would be established and set out in the Programme Complement. As regards project selection, while it was envisaged that there would be an arrangement for the processing of applications through technical appraisal by the implementing body set out in the Programme Complement, the clear intention expressed in para. 13.34 was that the end of the process as set out in the Programme Complement would be the “final decision by the Steering Committee”.
Commission Guidelines
91. The guidelines for the Interreg IIIA Programme produced by the European Commission referred to in Chapter 13 of the SEUPB Operational Programme, which governed Interreg III at the time of the controversy in relation to Figary’s grant application, were contained in the document entitled Communication from Commission to Member States of 2nd September, 2004, laying down guidelines for a Community initiative concerning trans-European co-operation intended to encourage harmonious and balanced development of the European Territory – Interreg III (2004/C226/02)(the Guidelines). These consolidated guidelines replaced earlier guidelines.
92. Certain provisions of the Guidelines, which expressly related back to Article 20 of the General Regulation, are of particular relevance for present purposes. Point 25 dealt with the contents of the operational programme to be put in place, for example, the inclusion of provisions for implementing the programme, such as the designation of a management authority within the meaning of Article 9(n) and Article 34 of the General Regulation, which contents were reflected in the provisions of the SEUPB Operational Programme. It was also provided at point 27 that each programme would be supplemented by a Programme Complement as defined in Article 9(m) and described in Article 18(3) of the General Regulation. Point 29 provided that joint selection of operations and the co-ordinated monitoring of their implementation would be carried out by the Steering Committee. Further, as counsel for Figary emphasised, under Point 40 it was provided that the operations and projects would be selected on the basis of their eligibility for Interreg III by the Steering Committee. The requirements of point 29 and point 40 were reflected in para. 13.34 of the SEUPB Operational Programme.
SEUPB Programme Complement
93. The Programme Complement for the Interreg IIIA Programme post-dated, and was intended to be read in conjunction with, the SEUPB Operational Programme. It stated in Chapter 2 that the Programme would be implemented in a manner consistent with “the national and Structural Funds regulatory framework” and would ensure compliance with “Community policies and Interreg IIIA Guidelines”. Specific reference was made to the General Regulations and the guidance provided by the European Commission. Chapter 2 also addressed the responsibilities of an implementing agent (sometimes referred to as the implementation agent), one of whose core tasks would include receiving, processing and assessing applications “against Measure level Criteria” (sic). Chapter 4 dealt with project application and selection. In Clause 4(2) it was provided as follows:
“Responsibility for the selection of operations rests with the Steering Committee, in accordance with point 29 of the Interreg guidelines.”
While the Programme Complement envisaged an application process involving, inter alia, the implementing agent and the JTS, whose functions and powers were outlined in the subsequent paragraphs of Chapter 4, what is clear beyond question is that it was the Steering Committee which was “responsible for approving all grant offers based on acceptance of project applications” (Clause 4(6)).
SEUPB Procedures Manual
94. In January 2004 the SEUPB produced a document entitled “Procedures Manual for Implementing Agents” under the Interreg IIIA Programme. As is disclosed in the document, there were a number of different implementing agents responsible for administering the various measures under the Interreg IIIA Programme, including Government departments. The object of the manual was to set out the operating procedures for applications, such as Figary’s application for grant assistance, under the Interreg IIIA Programme. The Minister’s Department was, in fact, the relevant implementing agent.
95. The Procedures Manual is a useful document in that it dealt comprehensively with evaluation of applications for grant assistance in a format against which what happened in relation to Figary’s application can be readily identified and understood. It stipulated the form and content of applications for grant assistance and provided for a six stage assessment process of the applications as follows:
(a) Stage (1) involved the initial eligibility screenings and was to be carried out by the staff of the implementing agent;
(b) Stage (2) involved scoring applications and was to be carried out by an Assessment Panel;
(c) Stage (3) was approval by the JTS, which was to be conducted in accordance with Clause 2.4.5 quoted below;
(d) Stage (4), as outlined in Clause 2.4.6, was the Steering Committee evaluation, which could result in, inter alia, approval or rejection of the application;
(e) Stage (5) involved communicating the decision of the Steering Committee to the applicant; and
(f) Stage (6) involved economic appraisal, if the Steering Committee had in principle approved of the application, which, in the case of an application for funding in excess of €400,000, was put out to independent consultants to be identified via a tender process.
In fact, the application of Figary in issue on this appeal did not get beyond Stage (3).
96. Clause 2.4.5 of the Procedures Manual provided:
“All projects are forwarded to the . . . JTS . . . in Monaghan who will assess against Programme-wide Criteria and quality-proof the assessment process and papers. Each Implementing Agent must forward the following to the JTS:
• the Assessment Report (which includes a summary of the application form);
• full Part B Application Form;
• all relevant papers; and
• all relevant notes on scoring and assessment. . . .
Following its assessment, the JTS collates all applications (including recommended rejections) for presentation to the Steering Committee. The JTS aims to send all papers to the Steering Committee within fifteen days of the meeting. Therefore the Implementing Agents should forward all papers to the JTS at least three weeks before a Steering Committee meeting.”
While the duty imposed on the Minister’s Department in the role of implementing agent in the last sentence of that clause is at the core of Figary’s complaint against the Minister, it is important to emphasise that it was giving effect to Clause 4.2 of the Programme Complement and point 29 of the Commission guidelines in conformity with the requirements of the SEUPB Operational Programme.
History of processing of Figary’s application
97. The history of the submission and processing of the application by Figary for funding for the construction and management of the Marina project on the foreshore at Fahan is outlined in the first judgment (at para. 65 et seq.). In summary, what happened, by reference to the stages outlined in the Procedures Manual, was as follows:
(a) The original grant application form, which was in the standard form, was signed by John J. McDaid and Michael McDaid on behalf of Figary and dated 15th September, 2003. At this point in time, the Minister’s Department was the implementing agent for the purposes of the SEUPB Operational Programme and the Programme Complement and the application was submitted to it. On its face, the application was for funding in the sum of €2,460,070 from the Interreg IIIA Programme. However, an issue arose in the High Court as to the total amount of funding which Figary expected to get and that issue will be addressed later.
(b) Having got through Stage (1), the initial eligibility screening stage, the application came before an Assessment Panel, where it passed the score threshold for Stage (2).
(c) The application also obtained JTS approval at Stage (3).
(d) The next step in the process was that the application went before the Steering Committee, but it did not get through Stage (4) in December 2003 because of lack of a cross-border element to the project. Figary successfully appealed that decision to a Review Panel. However, the initial application did not proceed further.
(e) As is recorded in the First Judgment (at para. 66), Figary obtained a partner from Northern Ireland in order to satisfy the cross-border element and submitted an amended application to the Minister’s Department as implementing agent. Thereafter, in September 2004, at the request of the Minister’s Department, Figary submitted additional information. Eventually, the amended application came before an Assessment Panel in December 2004 and once again the application got over the score threshold. The Assessment Panel recommended that the application be forwarded to the Steering Committee for consideration. At that stage the Commission guidelines 2004/C226/02 were in place.
(f) The amended application also went through the JTS process successfully.
(g) Figary was then informed by the Minister’s Department of the positive recommendation of the Assessment Panel and that the amended application would be sent to the Steering Committee. Figary expected the Steering Committee to assess the amended application at its scheduled meeting in late January 2005. That did not happen, because the Minister’s Department, as implementing agent, did not forward the application to the Steering Committee, despite having been advised by the SEUPB that it should do so.
(h) By letter dated 23rd March, 2005, the Chief State Solicitor, on behalf of the Minister, informed Figary’s solicitors that the amended application would not be progressed further due to outstanding issues.
98. Figary subsequently made a complaint to the European Commission that its application had not been submitted by the Minister to the Steering Committee. The history of the processing of the complaint, which extended through 2005, 2006, 2007 and into 2008, is set out in some detail in the First Judgment (at paras. 71 to 76). What emerges is that the outstanding issues relied on by the Minister’s Department arose out of the Minister’s dispute with Figary in relation to alleged breaches of the terms and conditions of the Foreshore Lease, the position of the Minister’s Department being that the breaches gave rise to legal issues in respect of which it was likely that legal proceedings would be instituted against Figary.
99. Ultimately, the conclusion of the Directorate General for Regional Policy at the Commission on Figary’s complaint was set out in correspondence to SEUPB on 29th May, 2008. The conclusion is quoted in the First Judgment (at para. 76) as follows:
“(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.”
It was also recorded that the Director General had noted that, unfortunately, it was too late for Figary to re-submit its application. Even before that time, as is recorded by the trial judge in the First Judgment (at para. 73), it was too late for Figary to avail of any remedy under the Interreg IIIA Programme, since the window for funding had closed and Figary could no longer apply. Moreover, it was not open to Figary to apply under the Interreg IV Scheme, because it had a different focus and did not apply to marine infrastructure.
Findings in the First Judgment on liability for breach of statutory duty in relation to grant application
100. The trial judge considered whether the Minister, through the medium of the actions of his Department, was liable for breach of statutory duty to Figary for failure to progress the grant application to the Steering Committee in the First Judgment (at paras. 162 to 179). Because of the suggested shift in the position of Figary in relation to this aspect of the counterclaim on the appeal, it is necessary to consider the analysis and findings of the trial judge in some depth.
101. The trial judge first considered the circumstances in which an administrative action which is ultra vires will found an action for damages, doing so by reference to the decision of this Court in Pine Valley Developments Ltd. v. Minister for the Environment [1987] I.R. 23, quoting the “clear summary” from Wade on Administrative Law, 5th Ed., 1982 quoted by Finlay C.J. at p. 36. He also considered that question by reference to the decision of this Court in Glencar Exploration Plc v. Mayo County Council (No. 2) [2002] 1 I.R. 84, stating (at para. 166) that, 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”. He also considered the commentary on the “tort of misfeasance in public office”, or, put another way, the liability of a public body for ultra vires actions, by Fennelly J. in the Glencar case (at pp. 148 – 149), although he had earlier remarked that no claims for misfeasance in public office or wrongful interference with constitutional rights had been made by Figary. Following on from the foregoing analysis, he stated (at para. 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 [Figary] 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.”
That remains the position. The trial judge also considered the provisions and duties invoked by Figary in the context of the principles established in the Pine Valley case and the Glencar case, stating (at para. 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.”
102. Immediately following on from those remarks, the trial judge referred to observations in the Glencar case in relation to the decision of the European Court of Justice in Francovich v. Italy (Case C – 6/90 & C – 9/90) [1991] ECR 1 – 5357 (Francovich). He observed (at para. 171) that Keane C.J. in Glencar had suggested, albeit obiter, that the decision in Francovich –
“[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.”
The trial judge also noted that, in the Glencar case, Fennelly J. too had “considered Francovich” and he quoted the following passage from his judgment:
“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.”
103. The trial judge then noted (at para. 172) that up to that point there had not been consideration of “whether or not the Interreg Scheme could be said to impose ‘statutory duties’.” He noted that the Minister had 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 the State, so that a breach of “the Scheme”, if found, could not be said to be a breach of a statutory duty.
104. The trial judge then (at paras. 173 and 174) considered the decision of this Court in Emerald Meats Limited v. Minister for Agriculture (No. 2) [1997] 1 I.R. 1 (Emerald Meats (No. 2)). The trial judge noted that, in that case, this Court had found that the Minister for Agriculture had been wrong, as a matter of law, not to forward an application of the plaintiff for an import licence under certain EEC Regulations to the Community. The trial judge focused on the passage from the judgment of Blayney J. in which he dealt with the claim on behalf of Emerald Meats Limited that it was entitled to damages by reason of the breach by the Department of Agriculture of its obligations under the Commission Regulation 4024/89. In the passage quoted, Blayney J. stated that the case made on behalf of Emerald Meats Limited in reliance on the decision in Francovich was correct. He emphasised that it was not an action against the Community, but rather an action against a Member State. In the passage quoted by the trial judge, Blayney J. stated that the decision in the Pine Valley case was distinguishable on the following basis:
“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.”
The trial judge also noted that Blayney J. had “cited with approval” paragraphs 31 to 37 of the decision of the Court of Justice in Francovich. The trial judge then quoted those paragraphs (at para. 174).
105. The trial judge then stated (at para. 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.”
In relation to that paragraph, counsel for Figary acknowledged that it does not embody the test or set out the conditions by reference to which it is to be determined whether an organ of the State should be held so responsible, which will be addressed later, but submitted that the statement is correct. Further, as to whether there is State responsibility for breach of EU law in this case, it was submitted that this case is indistinguishable from Emerald Meats (No. 2).
106. The trial judge then set out the following summary of his conclusions (at para. 177):
“(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.”
On the hearing of the appeal it was suggested by counsel for Figary that the principle set out at (iii), in particular, the “as if” component of it, suggested that the decision of the High Court must be based on the application of European Union law. It was suggested that the trial judge had applied European Union law, but in a “slightly disguised” way.
107. The foregoing principles were then applied by the trial judge (at paras. 178 and 179). He stated in para. 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 [Figary’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 [Figary] 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.”
The trial judge then stated (at para. 179) that he was satisfied that the duty in question was one which was owed directly to Figary, and that it was entirely foreseeable that, in failing to forward its application to the Steering Committee, loss of chance would be suffered by Figary. On that basis he found that Figary was entitled to damages as a breach of statutory duty. In so doing, it seems to me that he was applying the principles enunciated at (i) and (iii) in the passage in his judgment (at para. 177) quoted above, rather than the principles summarised at (ii) derived from the Pine Valley and Glencar decisions.
Grounds of appeal on liability
108. The grounds set out in the Minister’s notice of appeal on which he contests the finding of liability on his part for breach of statutory duty which were pursued on the hearing of the appeal were primarily the following:
While the ground at (b) above is ex facie very broad in scope, for completeness it is appropriate to record that it was contended on behalf of the Minister that –
Although I do not consider it necessary to specifically address those grounds, they have not been overlooked. Having regard to what it is suggested is a shift in the position of Figary on this aspect of the appeal, I consider that the practical approach is to outline Figary’s arguments on liability first, and then to outline the Minister’s response. In fairness to the parties, it is appropriate to do so in some detail, because the arguments on each side are more expansive than those considered in the First Judgment and the Second Judgment.
Figary’s submissions on liability
109. The position adopted by Figary on the appeal was that the breach of duty which grounds Figary’s claim against the Minister is a breach of duty imposed by European Union law. It is a breach of duty in respect of which the general principles established by the European Court of Justice in Francovich v. Italy (Case C – 69/90) ([1991] E.C.R 1 – 5357) apply. According to those principles a Member State is obliged to make good damage caused to individuals by breaches of Community law for which it can be held responsible, as laid down by the European Court of Justice in its judgment at para. 37, which was quoted in the judgment of the trial judge. Further, it was submitted that three conditions for State liability, as elaborated on in the decision of the Court of Justice in Brasserie du Pêcheur v. Germany (Case C – 46/93) [1996] E.C.R I – 1029 (Brasserie du Pêcheur) are met by Figary. These conditions are set out by the Court of Justice in its judgment as follows (at para. 51):
“. . . Community law confers a right to reparation where three conditions are met: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties.”
Counsel for Figary relied in particular on paragraphs 55 to 57 of the judgment of the Court of Justice in Brasserie du Pêcheur in which the application of the second condition was specifically addressed. The Court of Justice stated:
“55. As to the second condition, as regards both Community liability . . . and Member State liability for breaches of Community law, the decisive test for finding that a breach of Community law is sufficiently serious is whether the Member State or the Community institution concerned manifestly and gravely disregarded the limits on its discretion.
56. The factors which the competent court may take into consideration include the clarity and precision of the rule breached, the measure of discretion left by that rule to the national or Community authorities, whether the infringement and the damage caused was intentional or involuntary, whether any error of law was excusable or inexcusable, the fact that the position taken by a Community institution may have contributed towards the omission, and the adoption or retention of national measures or practices contrary to Community law.
57. On any view, a breach of Community law will clearly be sufficiently serious if it has persisted despite a judgment finding the infringement in question to be established, or a preliminary ruling or settled case-law of the Court on the matter from which it is clear that the conduct in question constituted an infringement.”
110. As regards the first condition, that the rule of law was intended to confer rights on individuals, in demonstrating that this condition has been met, counsel for Figary conducted an in-depth analysis of the legislative and administrative structure on which the Interreg IIIA Programme was founded, which the Court has followed in outlining the legislative and administrative structure above. It was submitted, on the basis of the analysis, that, quite apart from the express duty in para. 2.4.5 of the Procedures Manual, the duty to duly forward completed applications to the Steering Committee was an integral element of the scheme deriving from the General Regulation and from the express provisions of the implementing measures, in particular, the Commission guidelines and the specific measures in the SEUPB Operational Programme, which derive from the General Regulation itself. If an implementing agent such as the Minister’s Department, were to usurp or trespass on the decision making roles of the managing authority or the Steering Committee or ultimately the Commission, the provisions of the General Regulation, it was submitted, would be rendered nugatory or at least to some extent redundant. It was further submitted that Article 8 of the General Regulation does not mean that a Member State can arrogate to itself functions that are conferred on partnership bodies and/or the Commission under the General Regulation, because to do so would undermine the operation of the General Regulation. Counsel for Figary relied on the finding of the trial judge that the obligation of the Minister’s Department, as implementing agent, to forward Figary’s application to the Steering Committee, which counsel characterised as a highly specific and targeted duty, was a duty expressly directed towards the applicants under the Interreg IIIA Programme, of which Figary was one. On that basis it was submitted that the first condition had been met, in that the Minister, through the medium of his Department, had infringed a Community rule which was intended to confer individual rights on persons in the position of Figary, applicants under the Interreg IIIA Programme.
111. Turning to the second condition, whether the breach is a serious breach, in reliance on the “decisive test” outlined by the Court of Justice in Brasserie du Pêcheur, which is quoted above, it was submitted on behalf of Figary that there was a serious breach by the Minister. It was submitted that the Minister’s Department, as implementing agent, had no discretion whatsoever in relation to sending forward Figary’s grant application to the Steering Committee. Further, its failure in the course of the investigation of the complaint to the Commission, to identify any provision of the scheme which could have justified its position, rendered the error made inexcusable. Counsel for Figary also placed some reliance on the fact that the Minister’s Department ignored advice which it had been given in unequivocal terms in August 2004 and in January 2005 by the SEUPB that the application should be forwarded to the Steering Committee.
112. As regards the third condition, namely, that there should be a direct causal link between the breach of obligation by the Minister and the damage sustained by Figary, the failure of the Minister’s Department to forward Figary’s application to the Steering Committee, it was submitted, was the direct cause of Figary losing the opportunity to obtain the grant. Moreover, it was submitted that the damage which resulted was very substantial and was irreversible in that, by the time Figary’s complaint to the Commission had been investigated, the relevant funding had ceased.
113. On the hearing of the appeal, counsel for the Minister referred this Court to a recent decision of the Court of Justice (Second Chamber) delivered on 3rd September, 2014 on a request for a preliminary ruling under Article 267 TFEU from a court in Lithuania in proceedings entitled Case C – 410/13 ‘Baltlanta’ UAB v. Lietuvos valstybë (‘Baltlanta’). Counsel for Figary also addressed this authority, which concerned the interpretation of a provision of the General Regulation, Article 38. Article 38(1) provides that, without prejudice to the Commission’s responsibility for implementing the general budget of the European Communities, Member States shall take responsibility in the first instance for the financial control of assistance. There are then outlined the measures which the Member States shall take to that end including, at paragraph (e) –
“preventing, detecting and correcting irregularities, notifying these to the Commission, in accordance with the rules, and keeping the Commission informed of the progress of administrative and legal proceedings”.
114. In the main proceedings, ‘Baltlanta’ was suing the Ministry of Agriculture, representing the Lithuanian State, for compensation on the basis that the Ministry, by its failure to act, wrongfully prevented ‘Baltlanta’ from receiving financial assistance for the permanent withdrawal of a fishing vessel from fishing activity. ‘Baltlanta’ had submitted the request for financial assistance in March 2007 but its application had been rejected by the National Agency. ‘Baltlanta’ appealed that decision to the administrative court in Vilnius and was successful, in that the decision of the National Agency was annulled. That decision was confirmed by the Supreme Administrative Court of Lithuania by a judgment in May 2012. In January 2012 the Ministry of Agriculture had informed ‘Baltlanta’ that its application could not be processed further on a number of grounds, including that the assistance agreements under the relevant measure for granting assistance from European Union Structural Funds had to be concluded by 1st July, 2008. The allegation of wrongdoing by ‘Baltlanta’ against the Ministry of Agriculture was that it failed to take all the measures possible in good time to inform the Commission that the question of eligibility of its application for assistance was the subject of court proceedings, to establish an assistance scheme, and to provide funds for the period following that period when the question concerning the grant of assistance had been settled. ‘Baltlanta’ contended that the inaction by the Ministry of Agriculture thereby caused it damage. In essence, the Court of Justice found that Article 38(1)(e) of the General Regulation was not applicable to the dispute in the main proceedings.
115. What is of significance for present purposes is that the Court gave consideration to Commission guidelines which had addressed matters such as projects which were unfinished and non-operational at the time of closure. In relation to the guidelines the Court stated (at para. 64 and 65):
“64. . . . with regard to Sections 6 and 7 of the Commission guidelines, it should be noted, first, that, even if those guidelines are not intended to produce binding effects, the national courts are bound to take them into consideration in order to decide disputes submitted to them, in particular where they cast light on the interpretation of national measures adopted in order to implement them or where they are designed to supplement binding European Union provisions . . .
65. It should be noted, secondly, that those guidelines must be interpreted in accordance with the binding European Union provisions which they seek to supplement, namely Regulation No 1260/1999.”
While, importantly, those paragraphs do give guidance as to how a national court should treat Commission guidelines, as counsel for Figary acknowledged, in reality, the actual decision in ‘Baltlanta’ does not advance Figary’s case. On the other hand, it is not adverse to Figary’s position as to the application of the General Regulation, as was suggested by counsel for the Minister in reply. Rather it is a decision as to the interpretation of a specific provision of the General Regulation, and other regulations, and of clauses of Commission guidelines which are not in issue here.
The Minister’s response on liability
116. The general thrust of the written submissions originally filed on behalf of the Minister on the issue of liability was that the Interreg IIIA Programme was designed to stimulate co-operation between Member States of the European Union by providing funding to projects throughout the European Union with a cross-border element. The objective of the General Regulation was to promote cohesion. The Interreg IIIA Programme was in the interest, and for the benefit, of the public at large. It was submitted that in concluding that “the duties under the Scheme were expressly directed towards the applicants of that Scheme, of which [Figary] was one”, the trial judge fell into serious error. It was pointed out that no attempt was made by the trial judge, or indeed by Figary, to identify any basis for an alleged individual duty said to be owed. It was also asserted that Figary had singularly failed to identify the relevant statutory provision or duty that the Minister was alleged to have breached. It is perhaps worth recalling, as stated at the outset, that, in the course of the pleading process, Figary was not asked to identify the relevant statutory provision. That Article 34 of the General Regulation could give rise to an enforceable statutory duty on the part of the Minister, breach of which would give rise to a claim for damages, was wholly disavowed.
117. In essence, the Minister adopted a similar position in response to the submissions made on behalf of Figary on the appeal. The Minister’s position remained that the answer to Figary’s contention that the failure of the Minister to progress Figary’s application constituted a breach of European Union law continued to be that the grant application process under Interreg IIIA did not have a European Union rule of law or a statutory basis, but was an ad hoc arrangement. Further, the Minister continued to focus on the first condition of the Francovich test. Overall, the answer, it was submitted, was that the framework for the Interreg IIIA Programme, which derives from the General Regulation, did not have as its intendment the conferral of any rights on individuals, the breach of which might give rise to a damages claim against the Minister. In particular, Figary was not an affected person or body which was entitled to invoke what were described as Francovich rights.
118. Counsel for the Minister helpfully produced further written submissions in response to the written and oral submissions made on behalf of Figary on the liability issue on the appeal. In those submissions the scope of the liability of a Member State for breach of European Union law in the light of the case law and of commentary in the academic authorities relied on by Figary, in particular, “Public Liability in EU Law, Brasserie, Bergaderm and Beyond” by Pekka Aalto (2011, Oxford and Portland, Oregon) is considered. What follows in the submissions is an interesting commentary on the evolution of the law on the liability of a Member State for reparation to an individual for breach of European Union law. The discussion culminates in an analysis of one of the most recent cases relied on by counsel for Figary: the decision of the Court of First Instance in Case T – 415/03, Cofradia de Pescadores de San Pedro [2005] ECR II – 4355 (Cofradia). In its judgment, the Court of First Instance having, at para. 85, observed in a passage relied on by counsel for Figary, that it is unimportant whether or not the rule of law infringed constitutes a higher-ranking rule of law, stated as follows (at para. 86):
“Further, it has been held in case-law that a rule of law is intended to confer rights on individuals where the infringement concerns a provision which gives rise to rights for individuals which the national courts must protect, so that it has direct effect (Joined Cases C - 46/93 and C - 48/93 Brasserie du Pêcheur and Factortame [1996] ECR I - 1029, paragraph 54), a provision which creates an advantage which could be defined as a vested right (see, to that effect, Case T- 113/96 Dubois et Fils v Council and Commission [1998] ECR II - 125, paragraphs 63 to 65), a provision which is designed for the protection of the interests of individuals (Joined Cases 83/76, 94/76, 4/77, 15/77 and 40/77 HNL and Others v Council and Commission [1978] ECR 1209, paragraph 5), or a provision which entails the grant of rights to individuals, the content of those rights being sufficiently identifiable (Joined Cases C - 178/94, C179/94, C - 188/94 to C - 190/94 Dillenkofer and Others [1996] ECR I - 4845, paragraph 22).”
119. On the basis of their analysis of the categories of rules of law intended to confer rights on individuals identified in Cofradia, it is urged by counsel for the Minister that the duty on the Minister which is alleged to have been breached in this case does not fall within any of those categories. First, it is observed that it is striking that in each of the cases cited in para. 86 that the relationship between the rights conferred and direct effect is readily identifiable. Secondly, it is submitted that Figary’s case based on alleged breach of duty is wholly different from the authorities identified or, indeed, from any formulation of a European Union rule of law. Thirdly, addressing the legislative and administrative structure governing the Interreg IIIA Programme, it is submitted that it is not sufficient to identify any provision of the Programme Complement which has not been complied with in order to elevate such provision into a right under European Union law, the breach of which entitles Figary to pursue a claim for damages. On the contrary, it is submitted that, consistent with the case law, there must be a direct relationship between the contended for right and the applicable European Union framework, citing a statement in Aalto (op cit.) that, “a person claiming responsibility for damage must first identify the rule of law said to have been breached”. It is submitted that what is contended for as the “rule of law” breached by the Minister’s Department is not provided for in the General Regulation or any of the subsidiary provisions thereof. On the contrary, on the basis that it could only be by reference to the Programme Complement, and “the modalities of its relationship with the Managing Authority”, that it could conceivably be said that the Minister, as implementing agent, derived any delegated functions from the General Regulation, it is contended that there is nothing in the General Regulation to support the view that its provisions were intended to confer rights on any specific group or individual. That is the nub of the Minister’s argument in response to Figary’s claim under the Interreg IIIA Programme and it brings one back to the Minister’s principal contention that the objective of the General Regulation was cohesion and it was intended to be in the interest of the public at large.
120. Finally, counsel for the Minister directed the Court’s attention to two decisions of the European Union courts, which it is suggested support the Minister’s argument, each of which involved issues which came within the framework of the General Regulation.
121. The first, chronologically, was the decision of the Court of First Instance (Fourth Chamber) of 15th March, 2004 in Case T – 139/02 Idiotiko Institouto . . . and Others v. The Commission. There the Court was concerned with an application for the annulment of a decision of the Commission not to bring to an end alleged discrimination between public and private vocational training bodies in Greece with regard to their access to the financing from the structural funds under an operational programme in Greece. The application was found to be inadmissible. Counsel for the Minister rely on the following passage in the judgment of the Court of First Instance at para. 44:
“The implementation and monitoring of assistance are above all a matter for the Member States in accordance with the principle of subsidiarity. Thus, the programme complement, as adjusted and amended by the Monitoring Committee, to which the applicants refer and which gives priority to national education, constitutes a national measure concerning the application of strategy and priorities and not a measure adopted by a Community body, against which an action for annulment may be brought before the Community Courts.”
As is clear from that quotation, the context in which the Programme Complement was in issue was in relation to “the application of strategy and priorities”. The status of the Programme Complement in that context is further addressed in the following passage of the judgment (at para. 66):
“Under Article 18(3) of the [General Regulation] the types of ‘final beneficiary’ of those measures, which, under Article 9(1) of that regulation, may include bodies and ‘public or private’ firms responsible for commissioning operations, are defined in the programme complement drawn up by the Member State concerned or by the managing authority designated by that State to manage the operational programme in question. That document is used in implementing the strategy and priorities of the assistance and contains the detailed aspects of the measures, as provided for in Article 18(3) of the [General Regulation], which include, in particular, the ‘definition of the types of final beneficiary of measures’. The same document, adjusted as necessary in accordance with Article 34(3) . . . and approved by the Monitoring Committee, is sent to the Commission for information and not for approval. The Commission intervenes in that field only in so far as the information contained in the decision on the contribution from the Funds, such as the total amount of the contribution from the Funds granted in respect of the priority concerned or the specific objectives of that priority, may be amended by the programme complement or its adjustments.”
While the decision of the Court is enlightening in relation to the status of the Programme Complement, in my view, the decision is not of relevance to Figary’s claim, which is not concerned with the application of strategies and priorities and is not simply based, or reliant, on the provisions of the Programme Complement. Further, Figary’s claim, being a claim against the Minister representing the State, not against a European Union institution, it is distinguishable.
122. In the later case, – Case C – 301/03 Italian Republic v. Commission of the European Communities – the Court of Justice (Second Chamber) in a judgment delivered on 15th September, 2005 held that the application by the Italian Republic to annul certain notes and a document sent by the Commission to Italy, which, in broad terms, related to the operation of an operational programme and a programme complement, was inadmissible. The gravamen of the Court’s decision was that neither the notes nor the contested document were intended to have legal effect. Counsel for the Minister, apart from relying on certain passages from the opinion of the Advocate General, relies on the following passage from the judgment of the Court (at para. 30):
“While the contested document and notes may have the effect of informing the Member States that they are running the risk of Community financing being refused for some of the expenditure incurred, in accordance with a different interpretation of the same [General Regulation], this is none the less a mere consequence of fact and not a legal effect the contested document and notes are intended to have . . .”
Earlier the Court had stated as follows (at para. 28):
“As was pointed out by the Advocate General at paragraph 59 of his Opinion, it is clear from Articles 15(6), 34(3) and 35 of the [General Regulation], read together, that, in such a procedure, the Commission has a mere consultative role and is not empowered to adopt any legally binding act, except where any amendments relate to the elements contained in the decision on the contribution of the Structural Funds within the meaning of Article 34(3) of the [General Regulation].”
Once again, in my view, the decision of the Court of Justice is of no relevance to the issue of the Minister’s liability to Figary. In this case, Figary is relying on the duties imposed in the Commission guidelines in relation to selection of operations, in particular, point 29 and point 40, by which an implementing agent is bound, not on a note or a document of the Commission which has no legal effect.
123. As has been noted above, the nub of the Minister’s answer to Figary’s claim on liability is that the Minister could not be considered liable as implementing agent for a breach of European Union law by reference to the duties imposed on him by the provisions of the Programme Complement. Apart from that, as regards Figary’s invocation of Article 34 of the General Regulation, the point is made on behalf of the Minister that Article 34 refers to the role and responsibilities of “the Managing Authority” as defined in Article 9(n) of the regulation. The role of the Minister in relation to the Interreg IIIA Programme was as “implementing agent”, which role it is suggested was a creature of the Programme Complement only, and is a role in respect of which there is no reference in the General Regulation or in any regulation. As has been pointed out earlier, Regulation 438/2001 clearly envisaged intermediate bodies, such as implementing agents, being part of the legislative and administrative framework. Having regard to the definition of “managing authority” in the General Regulation and, in particular, the requirement that, if the Member State designates a managing authority other than itself, it shall determine all the modalities of its relationship with the Managing Authority and of the latter’s relationship with the Commission, it is suggested that the General Regulation “divorces” from European Union law how the processes or procedures to be operated in respect of the General Regulation are to be operated. It is suggested, for example, that the relationship between the managing authority and the implementing authority are to be determined by the Member State. Further, it is submitted that this is consistent with the argument that there is nothing in the Commission guidelines which can change the scope of the rights or obligations arising under the General Regulation.
124. The approach of the Minister to the interpretation of the legislative and administrative framework as outlined above, in my view, wholly fails to adopt the proper approach to consideration of the relevant provisions of the legislative and administrative structures in failing to consider them in the round.
Conclusion on liability: general approach
125. The first step in considering whether the Minister is liable for breach of duty as alleged by Figary, in my view, is to take an overview of all of the relevant provisions of the legislative and administrative structures which govern the establishment and implementation of the Interreg IIIA Programme and to analyse the interconnection between similar provisions in the different structures, and across the structures, and at different levels within the structures. The objective of that exercise is to determine whether it is appropriate to find that the Minister, acting through the medium of his Department, in preventing the forwarding of Figary’s grant application to the Steering Committee was in breach of a rule of European Union law which imposed an obligation on the Minister to do so. If there is a positive finding against the Minister on that point, the issue which remains is whether the breach of the duty under European Union law gives rise to an action for damages against the Minister, which, broadly speaking, involves the application of the principles established in Francovich and elaborated on in Brasserie du Pêcheur.
Overview of legislative/administrative structures
126. As the history of the processing of Figary’s application demonstrates, the amended application did not go beyond Stage (3) of the process. The wrongdoing alleged against the Minister is that his Department, as implementing agent, prevented Figary from getting access to grant assistance by –
(a) contravening Clause 2.4.5 of the Procedures Manual, in preventing Figary’s application going to the Steering Committee in January 2005, and
(b) contravening the SEUPB Programme Complement on the same basis. While Clause 2.4.5 of the Procedures Manual, which mandated the implementing agent to ensure that the relevant documents would be forwarded to the Steering Committee, was at the base of the national administrative structure, as emphasised earlier, it gave effect to the Programme Complement, which, although part of the national administrative structure, was derived from the General Regulation. Accordingly, an overview of the legislative and administrative structures demonstrates that the relevant provisions of the Programme Complement interlocked with measures provided for higher up the chain of those structures. For example, Clause 4.2 in Chapter 4 of the Programme Complement, to which Clause 2.4.5 of the Procedures Manual gave effect, itself actually gave effect to point 29 of the Commission guidelines. Chapter 4 of the Programme Complement in turn, reflected the clear intention manifest in para. 13.34 of the SEUPB Operational Programme that the final decision on a grant application would be the decision of the Steering Committee, which was prescribed by the SEUPB on the basis of the statutory authority given to it by the Act of 1999. It was also prescribed with the approval of the Commission pursuant to the General Regulation.
127. For the purpose of determining whether non-compliance by the Minister’s Department, as implementing agent, with the requirement of Clause 2.4.5 of the Procedures Manual, or of Clause 4.2 of Chapter 4 of the SEUPB Programme Complement, could give rise to a wrong actionable at the suit of Figary on the basis that it constituted a breach of statutory duty, the obligation of the Minister’s Department in that capacity cannot be assessed merely by consideration of the Procedures Manual on its own, or of the SEUPB Programme Complement on its own or of both in conjunction. Rather, it must be assessed in the context of the entire legislative and administrative structures from which the power and authority of the SEUPB was derived. Accordingly, the question which arises, when considering the effect of the various elements of the legislative and administrative structures, is whether, taking an overview of all of the instruments outlined above it, is clear that the Minister’s Department, as implementing agent, had a mandatory duty under European Union law in relation to a grant application, such as the application of Figary, to forward it to the Steering Committee.
128. As regards the question posed in the next preceding paragraph, in my view, the answer is clear. The Minister, as implementing agent, did have a mandatory duty under European Union law to forward Figary’s grant application to the Steering Committee for “final decision”. The overview of the legislative and administrative structures outlined above clearly demonstrates the interconnection between the different structures and the interlocking nature of the various levels of the structures. In particular, having regard to the paragraphs from the judgment in Baltlanta quoted earlier, this Court is bound to take the Commission guidelines into consideration in determining this question. The relevant Commission guidelines unquestionably cast light on the interpretation of the national measures adopted to implement them, particularly, the Programme Complement. They are also clearly designed to supplement binding European Union provisions, being specifically provided for in the General Regulation. As was made clear in Baltlanta they must be interpreted in accordance with the General Regulation.
129. The relevant provisions of the Commission guidelines clearly provide that project selection under the Interreg IIIA Programme is the function of the Steering Committee. The national measures from the SEUPB Operational Programme downwards all provide that the Steering Committee has the “final decision” on selection and that is clearly consistent with the Commission guidelines. As the trial judge found, in reality the Minister’s Department, in the role of implementing agent, illegally usurped that function of the Steering Committee. By that action, the Minister was not only in breach of the national measures put in place by the SEUPB on the basis of the authority conferred on it by the Act of 1999, but also breached the Commission guidelines and ultimately the requirements of the General Regulation. Accordingly, I am satisfied that there has been a breach of a rule of European Union law on the part of the Minister in his Department failing to forward Figary’s amended application to the Steering Committee.
130. It is perhaps worth recording that counsel for Figary also placed some reliance on an agreement entitled Interreg IIIA Service Level Agreement between the SEUPB and the Implementing Departments. In addition, counsel for Figary referred this Court to Circulars issued by the Department of Finance to other Government Departments in relation to responsibilities under the General Regulation and Regulation 438/2001. In particular, this Court was referred to Circular 34/2001 of 27th July, 2001, in which the addressees were informed that conformity with the Circular and with the relevant EU Regulations was obligatory. However, the conclusion reached that the Minister’s obligation, as implementing agent under the Interreg IIIA Programme, arises under European Union law is not informed by those matters. They do, however, compound the absurdity of the proposition that the role and duty of the implementing agent in the enormously complex legal and administrative structures derived from the General Regulation employed in the implementation of the Interreg IIIA Programme could be seen as being an ad hoc arrangement.
Application of Francovich/ Brasserie du Pêcheur test
131. That the three conditions stipulated by the Court of Justice in its judgment in Brasserie du Pêcheur are met, in my view, is absolutely clear. First, the rule of law infringed was part of the European Union legal structure governing Community action through the Structural Funds. While, of course, the Interreg IIIA Programme was public in nature and was intended to be in the interest and for the benefit of the public at large, as regards the rule of law infringed by the Minister, it related specifically to the implementation of the provisions contained in the Interreg IIIA Programme instruments governing selection of operations and projects for grant assistance. As such, it was a rule which was intended to confer rights on individuals, that it to say, a person or a corporation which applied to participate in the Interreg IIIA Programme, and it clearly was not a rule imposed for the benefit of the public at large. Secondly, the breach was sufficiently serious to confer a right to reparation against the State on the injured individual. It undoubtedly met the “decisive test”, in that the Minister “manifestly and gravely disregarded the limits” on his discretion as implementing agent in relation to the processing of grant applications. In fact, as was submitted on behalf of Figary, his Department had no discretion as to whether Figary’s grant application should be sent forward to the Steering Committee. Thirdly, there is a direct causal link between the Minister’s breach and such damage as was sustained by Figary by not having its grant application processed.
The Minister’s liability for damages
132. Notwithstanding that the trial judge did not expressly apply the Brasserie du Pêcheur test to the circumstances which gave rise to Figary’s claim under the Interreg IIIA Programme, it is quite clear that he concluded that there was a breach of duty on the part of the Minister which was actionable in Irish law. In doing so, he followed the decision of this Court in Emerald Meats (No. 2), in which it was accepted that the right to recover damages from a Member State for the breach of an obligation imposed by European Union law is clearly recognised in the decision of the Court of Justice in Francovich (per Blayney J. at p. 16). Further, the trial judge, again following the decision of this Court in the Emerald Meats (No. 2), held that the action for damages gave rise to an entitlement to both general damages and special damages.
133. On this appeal, having regard to the findings on the application of the Brasserie du Pêcheur test set out above, I am satisfied that the Minister is liable in damages to Figary, for both general damages and special damages. The measure of damages must now be considered. As part of that exercise, it is necessary to address the controversy alluded to earlier concerning the amount of the grant sought by Figary and it is convenient to address it at this juncture.
Amount of grant funding sought by Figary
134. That controversy is addressed by the trial judge in the First Judgment (at para. 161). As I have noted, on its face, the grant application stated that the amount of funding which Figary was seeking was €2,460,070. Earlier in the First Judgment (at para. 65), it had been recorded that the position of Figary was that the application submitted in September 2003 was “for funding of €2.46 million, plus a top up from the State of €630,000 (although the [Minister] now contends that the latter amount was included in the former)”. Returning to what he referred to as “one issue of fact” (at para. 161), the trial judge recorded that in the Minister’s submissions it was alleged that the €2.46 million was inclusive of a top up from the State of €630,000, rather than in addition to it. Having made some observations in relation to the evidence before him, the trial judge said that he was proceeding “on the assumption that the grant applied for was for €2.46 million with an additional top up from the Department of €630,000”. One of the grounds advanced by the Minister on the appeal was that the trial judge erred on the facts in proceeding on that assumption, when, in fact, the figure of €2.46 million was inclusive of the said sum of €630,000. Counsel for the Minister referred this Court to the relevant portions of the grant application form. In section E of the form, the response of Figary to the question which inquired how much funding Figary was seeking for the project from the Interreg IIIA Programme was that it was €2,460,070. On the next page of the form that sum is set out in a table which gives details of all sources of funding relating to the project. It is clear from the table, under the heading “Co-funding”, that the sum of €2,460,070 was expected to come from “EU & Government”. In the definitions below that table, “Co-funding”, as shown in the table, is defined as follows:
“Is the amount applied for in this application and normally contains 75% EU and 25% Central Government or other sources of statutory funding.”
135. I am satisfied that counsel for the Minister have demonstrated that the oral evidence upon which the trial judge relied and based his finding as to the amount of grant funding for which Figary applied for was wholly unsatisfactory. Further, it was not borne out by the application form, which plainly contradicted it. Therefore, I am satisfied that the trial judge’s finding as to the amount of the grant funding sought by Figary was incorrect. I am satisfied that the total amount of the grant for which Figary applied, rounded, was €2.46 million and that included the element of co-funding for which the State was liable, namely, €630,000. Indeed, when the issue was raised in the course of submissions on the last day of the hearing in the High Court before the First Judgment was delivered, counsel for Figary effectively acknowledged that the sum of €630,000 was not a top up but was included in the sum of €2.46 million. It is recorded in the transcript of 27th October, 2009, Day 16, page 30, that in the course of the closing submissions counsel for the Minister submitted:
“The claim, in fact, in monies is misconstrued in that the defendant seems to assert that they had potentially a grant claim of 2.4 million, together with 630,000, but that’s not correct.”
At that stage counsel for Figary intervened and stated that he accepted that and that there had been an error. However, it is only fair to record that, on the hearing of the appeal, when counsel for Figary was asked by the Court whether Figary was persisting in the “top-up” argument, it was not conceded that it was not.
136. In any event, I am satisfied that the starting point for the assessment of the damages for which the Minister is liable is that the Minister by his actions prevented Figary’s application for a total grant in the sum of €2.46m being considered by the Steering Committee. Some general observations in relation to the assessment are appropriate.
Assessment of damages: general observations
137. Because of the similarity of the consequences of the breach of statutory duty which gave rise to the entitlement of Emerald Meats Limited to damages as was held in Emerald Meats (No. 2) and of the breach of statutory duty which has given rise to the claim by Figary for damages against the Minister, it is appropriate to consider the manner in which this Court ultimately dealt with the damages to which Emerald Meats Limited was entitled. The decision of this Court in the final stage of the Emerald Meats Limited saga, which will be referred to as Emerald Meats (No. 3), was the judgment of O’Donnell J. ([2012] IESC 48), with which the other members of this Court concurred, which was delivered on 30th July, 2012. It was a judgment on an appeal from a judgment of the High Court (Feeney J.) which was delivered on 8th October, 2007 ([2007] IEHC 331) on the assessment of damages following remission by this Court to the High Court in Emerald Meats (No. 2). The object of such consideration is to assess whether there is a similarity between the factual matrix in which damages were assessed by this Court in Emerald Meats (No. 3) and the factual basis of Figary’s claim to damages against the Minister. In reality there is no such similarity. The major factual difference is that, in the period after the State had been in breach of statutory duty to Emerald Meats Limited, as a result of which Emerald Meats Limited was deprived of a licence to import meat for the year 1990, Emerald Meats Limited had effectively ceased trading in the meat business, which meant, as was stated in the judgment of O’Donnell J. (at para. 2), that its claim, which was for loss of profits from business which was not carried on over the succeeding years, was “a necessarily speculative exercise”. In this case, on the other hand, Figary had been in possession of the foreshore demised by the Foreshore Lease, had developed the Marina at Fahan, which was operational from 2002, and was conducting a business in connection with it before the breach of duty by the Minister in early 2005. Moreover, Figary continued in possession and continued to operate the business at the Marina thereafter. Therefore, in this case the Court should not be faced with the type of difficulty in assessing damages which the High Court and the Supreme Court encountered in Emerald Meats (No. 3), where the circumstances were such that it was recognised that in such circumstances a court can only do the best it can. In contrast, to use expressions drawn by counsel in this case from the judgment of O’Donnell J. in Emerald Meats (No. 3), the circumstances here are not such that it is necessary to resort to an “almost back of the envelope calculation”. Nor is it a situation where “rough and ready” calculations or “crude” adjustments are acceptable in assessing damages.
138. Another distinguishing feature of the approach necessitated by the factual circumstances in Emerald Meats (No. 3) is addressed in para. 39 of the judgment of O’Donnell J. Having recorded that the nature of the issue for the Court there was the assessment of damages which had been described by the Supreme Court in Emerald Meats (No. 2) as “general damages”, and having stated that, taking a broad view, it was “the assessment of the disruption to Emerald’s business and its relationship with other traders caused by failure to obtain the quota”, O’Donnell J. stated that it was accepted that the Court was engaged in the assessment of general damages, which in the words of Martin B. in Prehn v. Royal Bank of Liverpool (1870) L.R.M. 5 Ex 92:
“[a]re such as the jury may give when the judge cannot point out any measure by which they are to be assessed, except the opinion and judgment of a reasonable man.”
Further, O’Donnell J. referred to McGregor on Damages (London: Sweet & Maxwell, 15th Edn. 1988 14), where it was stated:
“The claim in this case is without doubt one for pecuniary losses ‘difficult to estimate’ and for which there is no measure but the opinion and judgment of a reasonable judge. In my view the court was not here concerned with the precise calculation of special damages, particularly once it was obliged to reject the primary (and indeed to some extent the secondary and tertiary) bases of calculation proffered by the parties.”
Given the different factual context in this case, in my view, the approach adopted in Emerald Meats (No. 3) would not be justified in this case. While undoubtedly, the High Court was, and this Court is, faced with a problem in calculating with precision the damages to which Figary is entitled, that is not caused by any inherent difficulty in calculating damages of the type concerned, but rather because of the undoubted failure of Figary to present adequate evidence.
139. The trial judge in the Second Judgment (at para. 92), having commented that the principle of restitutio in integrum still applies, notwithstanding evidential difficulties, quoted the following passage from the judgment of O’Flaherty J. in Callinan and Deane v. VHI (Unreported, Supreme Court, O’Flaherty J., 28th July, 1994), which had been referred to in the judgment of the High Court in Emerald Meats (No. 3). O’Flaherty J. stated:
“A party who suffers damage is required to be put in the same position as he would be if he did not suffer the damage: restitutio in integrum. It is obviously not the case that the Plaintiffs are in the same position as if the wrong had not been done to them; therefore, they must be entitled to damages. The fact that the actual figure to which they maybe entitled may not have been presented to the satisfaction of the judge does not mean that the Plaintiffs should not get any damages at all under this heading.”
The trial judge also quoted a passage from McGregor op cit. (at para. 344) in the last sentence of which it was remarked that “if absolute certainty were required as to the precise amount of loss that the Plaintiff had suffered, no damages would be recovered at all in the great number of cases”. While those quotations reflect one side of the coin, there is another side to the coin. It is that it would be to ignore the requirements of the burden of proof to give any benefit of the doubt to a plaintiff who deprives the Court of the opportunity to do a proper calculation, with whatever level of precision might be available in all the circumstances, by not presenting evidence which might reasonably have been expected. To do otherwise, would give rise to a real risk that a party would benefit by their failure to present such evidence. That is a factor of significance in assessing the damages for breach of duty in this case, which fall to be considered under two headings:
(a) the loss of opportunity to obtain the grant; and
(b) loss of profits deriving from what Figary contended was the potentially expanded level of business which might have been conducted had the grant been obtained, so that the Marina project would have been implemented, and such an expanded business would have become operational.
Findings of the trial judge on assessment of damages for breach of statutory duty
140. The trial judge addressed the first heading, which he referred to as loss of chance, in the First Judgment at para. 189 et seq. He recorded that there was agreement between the parties as to the relevant principles in relation to assessing damages for loss of chance, but that it was the correct application of the principles to the facts which was in dispute between them. Having cited two authorities of United Kingdom courts and stated that they identified the correct approach, the trial judge outlined that approach (at para. 191) as follows:
“(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.”
141. The trial judge then went on to consider whether Figary would have been successful on the grant application. It will be recalled that the breach of duty found on the part of the Minister was the prevention of Figary’s application advancing to stage (4), that is to say, the Steering Committee evaluation, which could result in either an approval or a rejection of the application. The trial judge (at para. 192) stated that he was satisfied on the evidence that Figary’s application, had it been presented to the Steering Committee, would have been successful. Although counsel for the Minister took issue with that finding, emphasising the landlord and tenant relationship problems which existed, which it was suggested put Figary’s entitlement to remain as lessee of the Marina under the Foreshore Lease in jeopardy, nonetheless, I am satisfied that there was ample evidence to allow the trial judge to conclude that the Steering Committee would, in principle, have approved the application. Of course, that would then lead to Stage (6), which would have involved an independent economic appraisal. As to the likely outcome of that stage of the process, the view of the trial judge, as expressed in para 192, was as follows:
“I am also satisfied that despite the alleged inconsistencies contained in [Figary’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 [Figary], and that subsequently [Figary] would have become entitled to draw monies down.”
The trial judge rejected an argument on behalf of the Minister that the project would not, in any event, have been able to proceed within the timeframe envisaged in the application because of the disputes between the parties in relation to the Foreshore Lease, which ultimately became the subject of this litigation. In the light of this Court’s decision on the Minister’s claim for possession, in my view, such rejection was the correct approach. However, in making the finding that Figary would have become entitled to draw monies down following the independent economic assessment, the assumption made by the trial judge was that such entitlement would have related to the entire grant application sought, not just part of it. Further, the trial judge’s finding as to the total amount of the grant applied for by Figary was that it was €3,090,000 (rounded from €3,090,070), made up of €2,460,000 and a “top-up” of €630,000 from the State. As has been found earlier, that assumption was incorrect; the amount of grant funding sought by Figary, rounded, was €2.46m.
142. The trial judge then went on (at para. 193) to evaluate the chance, stating:
“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 [Figary] in the construction of the marina to date, and bearing 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.”
Therefore, he assessed loss of chance at €1,545,000, although there was a typographical error in para. 193 where the relevant figure given was €1,045,000. The trial judge reserved his decision as to general damages pending further submissions.
143. In order to outline the factual context, reference to some of the narrative earlier in the First Judgment is apt at this juncture. The trial judge had recorded (at para. 59) that, as of 21st April, 2006, the construction of the Marina had cost Figary over €2.8m. It would be necessary to carry out substantial works in order to provide safe and appropriate breakwaters and restore portions of the foreshore and the estimated cost of completing the Marina properly was somewhere in the region of €2.7m, inclusive of VAT, although that did not include construction supervision costs or any costs attached to removal of sand off site. Since becoming operational in 2002 the Marina had generated the following profits: €308.00 to the end of March 2003; €1,204 to the end of March 2004; and €1,793 to the end of March 2005. The trial judge also recorded (at para. 64) that, if the grant application was successful, the monies paid to Figary would be a percentage, in this case 26%, of the expenditure to be actually incurred on the Marina project. On the basis of the grant application form submitted in September 2003, as completed on behalf of Figary, the estimated total project cost was €9,433,239.00. Counsel for the Minister relied on the foregoing matters and other evidence in urging this Court to find that the assessment of loss of chance at 50% was not supported by the evidence. The question as to whether Figary had a reasonable or substantial chance of being awarded a grant in the amount claimed, as found by the trial judge, will be considered later.
144. The second component of the claim of damages for breach of duty, that is to say, loss of profits, was dealt with by the trial judge in the Second Judgment. In reviewing what had transpired up to the time of delivery of the Second Judgment, the trial judge observed (at para. 21) that the Minister complained that, despite directions of the Court that further material and information with regards to reports by an accountancy firm, McCambridge Duffy, which had been put before the Court be provided to the Minister “which might have shed some light on the claim” for loss of earnings, this was not done. The trial judge then stated:
“Such failings bring [Figary’s] position entirely outside that of the Plaintiff in Emerald. Ultimately the evidence for loss presented by [Figary] was entirely unsatisfactory and incomplete with regards to the basis of the claim, the calculation of the alleged loss of earnings and/or missed trading opportunities; the deficiency, therefore, is not just a matter of imprecise quantum.”
145. The trial judge considered whether Figary is entitled to damages for loss of earnings it has suffered as a consequence of the Minister’s breach of statutory duty at para. 87 et seq. of the Second Judgment. In that paragraph he recorded that the sum claimed, based on a report of McCambridge Duffy, was €1,558,221. He then recorded some of the criticisms of the evidence called on behalf of Figary which were made by an expert witness called on behalf of the Minister, Kieran Wallace, Accountant of KPMG. He went on to state (at para. 89) that having considered the report of McCambridge Duffy, he was prepared to accept some of the criticisms which Mr. Wallace had directed toward the report. He stated that it was likely that the projected loss of earnings was overstated and, therefore, he was not prepared to grant special damages for loss of earnings in the amount claimed under the report. Nonetheless, he considered that he must grant some damages for loss of earnings, notwithstanding those reservations about the report. Further, having conducted the analysis of, inter alia, the passage from the judgment in Callinan and Deane v. VHI quoted earlier, the trial judge stated (at para. 93):
“In the present case, it is quite clear that the McCambridge Duffy report does not represent a satisfactory basis for calculating the loss of earnings as made. Nonetheless, as noted in Callinan and in Emerald Meats, the fact that a party has not sufficiently proved the actual quantum of damage caused should not deny it compensation where it is clear that the wrongful party's actions have actually occasioned loss. The measure of that loss must be such that it will place the relevant party back in the position it would have been, but for the tortious conduct; restitutio in integrum. Since a breach grounding damages has been found by this Court and since I am satisfied that loss has been occasioned as a result, which loss has not been compensated for adequately by the award previously made, I should not refuse relief merely because of the Defendant's inappropriate and unsatisfactory way of calculating such loss.”
The trial judge (at para. 94) went on to note that any calculation of loss of earnings at that stage would be subject to innumerable imponderables, upon which no particular evidence, actuarial or otherwise, had been presented, giving by way of example, the recent recession. Therefore, he decided to proceed on the basis that the actual figure to be granted under the heading of loss of profits would be “a general sum granted for compensation”.
146. The general sum which the trial judge arrived at for loss of profits was €500,000. It was premised on the basis that, if Figary had got grant funding for the Marina project and had expanded the Marina as contemplated in the project, the number of berths at the Marina would have increased from 164 to 396. It would have taken eighteen months to complete the construction of the extended Marina. However, by 2007 the additional berths should be available. The trial judge presumed that occupancy of the berths, once completed, would be 90%, which he acknowledged was a relatively generous presumption. As to the duration of the loss, it would be incurred over the period from 2007 to when the Marina will actually be constructed. Given that he was giving judgment in 2012, he assumed that that would not happen until after 2013 and, accordingly, he determined that he should compensate for loss of profits from 2007 to 2013, that is to say, for seven years. He calculated the loss on the basis of accounts of Figary referred to in the McCambridge Duffy report and, in particular, Figary’s turnover on the basis of 164 berths for the period from 2005 to 2009. He also factored in increased costs associated with the enlarged Marina, using the figure of €100,000 per annum, rather than the figure of €73,000 per annum suggested by McCambridge Duffy, as representing the increased costs. The bottom line was that the calculation of loss of earnings was €132,000 per annum, which over seven years would have amounted to a total loss of profit of €924,000, which figure was adopted as a guideline of the general damages for breach of statutory duty. It was acknowledged that those damages must also be reduced by 50% in line with the loss of chance damages reduction. The resulting figure was rounded to €500,000 and it was added to the figure awarded for damages for loss of chance. Accordingly, the total damages for breach of duty under Interreg IIIA to which Figary was held to be entitled being stated to be €2,045,000. If that figure was adjusted in line with the finding above that the correct amount of grant funding sought by Figary was €2.46m, the total damages awarded would amount to €1,730,000.
Conclusions on damages issues
Damages for loss of chance
147. Having expressed the view above that there was ample evidence to allow the trial judge to conclude that Figary would have received approval in principle from the Steering Committee, it is now necessary to consider what would have been the probable outcome of the subsequent independent economic appraisal of Figary’s application at Stage (6). There were three possible outcomes – that Figary’s application would be granted more or less in full; that Figary’s application would be refused; or that, on the basis of the economic assessment, Figary would qualify for a grant in a lesser sum than the amount sought. The trial judge did not consider that last possibility in the context of the hypothetical situation which was being assessed. Aside from that, in my view, consideration of the likely outcome of the independent economic assessment gives rise to very considerable difficulty, some features of which will be referred to.
148. First, a question arose on the evidence before the High Court as to the source of the expenditure which had already been incurred in relation to the Marina prior to the making of the grant application. On the evidence, that expenditure was not reflected at all in Figary’s accounts in any manner. Even to the extent that the evidence suggested that the expenditure was, in fact, incurred by other companies connected to Figary, Figary’s accounts did not reflect either the expenditure or whatever arrangements might have been entered into by Figary with those connected companies. Moreover, there was no evidence to establish what legal mechanism might be adopted to ensure that Figary got the benefit of that expenditure without being exposed to a corresponding obligation. It might be asked whether the connected companies could have made a voluntary transfer of their interests, whatever they were, to Figary and, if so, whether such transaction would have tax implications. None of these matters were explored and none of the questions resolved. That evidential deficit must be laid at Figary’s door. In the circumstances just outlined, there must be a significant doubt about the extent to which a proper independent economic assessment would have regarded the treatment of the expenditure on the works carried out prior to the grant application in the accounts of Figary as satisfactory. That unsatisfactory feature would likely lead to legitimate doubts on the part of the independent economic assessor as to the suitability of Figary for grant funding for the future Marina project.
149. Secondly, there was a significant paucity of evidence as to the exact cost of bringing the Marina up to the level contemplated in the project the subject of the grant application. While figures are given in the grant application, it is reasonable to assume that those figures would have been subjected to in-depth scrutiny in the independent economic assessment. Unfortunately, there is very little evidence available from which any conclusion could be reached as to the likely result of such appraisal. Once again, that evidential deficit must be laid at Figary’s door.
150. Finally, and significantly, it is by no means clear on the evidence that an independent economic assessor would have taken the view that a project of the scale of the Marina project contemplated was economically justified. In particular, differing reports on the likely demand for berths in the enlarged Marina were put in evidence in the High Court. On balance, those reports did not suggest that a marina on the scale which was under contemplation in the grant application might be justified. In short, it is impossible to come to any definitive conclusion as to what the result of the independent economic appraisal would have been, based on the materials and information available at the relevant time. Accordingly, there must be significant doubt as to whether the independent assessor would have concluded that the full scale of expansion which was contemplated by the grant application would have been justified.
151. Having regard to the foregoing matters, it seems to me that, in assessing, on the basis of the evidence before the High Court, the probable outcome of the independent economic assessment of Figary’s grant application, it is necessary not only to factor in a significant risk that the grant application would have been refused, but also a very significant risk that, even if it was allowed, the total amount of the grant which would ultimately have been approved would have been considerably less than the amount sought on the application. In all the circumstances it seems that the only conclusion on the evidence was that the chance of obtaining the full grant would have been extremely slight.
152. In the light of that conclusion, I consider that there was an error in the manner in which the assessment and calculation of the loss of chance of Figary receiving the grant sought was approached in the High Court judgment. While it is open to find that there was sufficient evidence to sustain a conclusion that there was probably a 50/50 chance of getting some grant, assuming that it is probable that there was some momentum in favour of allowing grant funding from Structural Funds for projects in the area in question, there was a complete failure to factor in the significant risk that, even if a grant was approved, the probability is that it would have been for less, and probably a lot less, than the amount of the grant sought by Figary.
153. Bearing in mind the general observation made earlier as to the risk inherent in adopting a soft policy to enforcing compliance with the applicable legal principles in relation to the burden of proof, one must ask whether it is appropriate that Figary should get the benefit of the doubt in respect of any area of uncertainty in the calculation of the loss of chance risk, which stems from its own failure to put adequate reliable evidence before the Court. The answer, in my view, is that it is not, having regard not only to that factor, but also to all of the other factors outlined above. Given the lack of adequate reliable evidence, it is not possible to be confident that, even if the ultimate outcome would have been that Figary would have received a grant, it would have been equivalent to the amount sought by Figary. On the contrary, it seems probable on the evidence that, on the basis of an independent economic assessment conducted in the first half of 2005, the amount of the grant would have been in the range of €800,000 to €1m. That assessment would have been conducted on the basis of the accounts of Figary and other material available in relation to the content of those accounts at the time of the assessment. That evidence is what must inform this Court as to the approach which would have been adopted in the independent economic assessment. The evidence suggests that the assessor would have been unlikely to conclude that Figary would have had the ability to match funding of €2.4m, which on the basis of Figary being liable for 74% of the total project cost, would be in the region of €7m. Indeed, it is perhaps being generous to Figary to conclude that it would be able to match grant funding within the range of €800,000 to €1m.
154. Accordingly, on the basis of a 50/50 chance of getting some grant and on the basis that that grant would be, at most, in the region of €800,000 to €1m, I have come to the conclusion that the proper measure of damages for loss of chance is between €400,000 and €500,000 and should be fixed at €450,000.
Damages for loss of profit/earnings
155. It will be recalled that the award of general damages in the sum of €500,000 made by the trial judge was premised on the Marina project being implemented by Figary and the additional berths being available for use by 2007, if Figary’s grant application had been successfully processed to conclusion, so that Figary’s earnings from the business conducted would have increased in the seven years after March 2007. The fundamental question on this aspect of the claim is whether there was adequate evidence to support that premise. In my view, there was not. By way of general observation, the failure of Figary to provide adequate evidence to support its claim for damages for loss of profits or earnings is a more serious category of failure than the paucity of evidence in relation to the probability of the grant application being successful. Given that Figary had been conducting business at the Marina in Fahan for approximately three years when the grant application fell for consideration in early 2005 and continued to trade thereafter, it is not possible to justify a “back of envelope” approach to assessing what loss of profit Figary has suffered after 2007 by reason of the expanded Marina not having been developed.
156. To pose an obvious question as to the viability of the premise underlying the assessment of the general damages by the trial judge, it is whether there was evidence to support the probability that the expanded Marina would be in use by 2007. As has been outlined above, even if Figary obtained the full grant sought, €2.46m, that would only represent 26% of the total cost of implementing the Marina project, so that Figary would have to put in the region of €7m into the project itself. That raises the question as to how Figary would fund that expenditure. This aspect of the evidence was wholly unsatisfactory. It is true that it was suggested in the evidence that promoters behind Figary were wealthy men. However, there was a complete lack of adequate evidence to identify where the significant sums which would have been required to carry out the project were to come from and, not least, whether some or all of them would have to have been borrowed. In that latter event, a significant interest charge would have been incurred on the cost of implementing the development and expanding the Marina, which clearly would be a material factor in assessing Figary’s profit, or even perhaps loss, on a current account basis. Accordingly, on the evidence adduced, it is by no means clear that an expanded Marina funded by significant borrowing would necessarily have been more profitable than the Marina as it was in 2005. In order for it to have been more profitable, any additional income less any additional operating expenses would have to have been sufficient to outweigh any likely interest charges. There was simply no evidence before the Court on which one could reach that conclusion. In the circumstances, it seems to me that the Court must conclude that Figary has failed to discharge the burden of proving that it has suffered loss of profit in consequence of the expansion of the Marina not having been carried into effect by reason of its failure to obtain the grant funding it sought.
157. Apart from that, observing Figary’s trading history at the Marina in Fahan up to 2005 and Figary’s profit as recorded in the First Judgment (at para. 59), one might ask, albeit at a very trite level, how would doubling, or even trebling, the number of berths have given rise to a profit of €132,000 per annum in 2007 and subsequent years, when the profit in the year up to March 2005 was merely €1,793.
158. In general, there are serious deficiencies in the evidence adduced by Figary to support its claim for additional damages for loss of profits. Not only that, but as is recorded in the Second Judgment (at para. 21), Figary failed to comply with the directions of the High Court that further material and information in relation to the McCambridge Duffy reports be provided to the plaintiff. The consequence is that, hovering in the background of Figary’s claim for damages for loss of profits, there are possible realistic scenarios as regards the likely increase in business as a result of the expansion of the Marina and the corresponding increase in overheads and interest charges on funds borrowed to effect the development, which, if they would have materialised, would not reveal any extra profit, if the development had been implemented. In order to disregard those realistic scenarios, it would be necessary for the Court to conclude that it was more probable that a more beneficial scenario would have pertained. The onus was on Figary to produce the evidence to satisfy the Court of that likelihood. Its failure to do so means that it did not discharge the burden of proof as to loss of profit. Accordingly, no damages are awarded under this heading.
Total award of damages
159. The total award of damages is the sum of €450,000, representing damages for loss of chance.
D – Summary of core determinations
160. As regards the Minister’s claim for possession of the Marina demised by the Foreshore Lease, I have reached the following conclusions. The Minister is not entitled to an order for possession on the basis that the Foreshore Lease has been forfeited for breach of covenant by Figary. On the other hand, the Minister has prima facie established an entitlement to an order for possession under s. 52 of Deasy’s Act, but, subject to compliance by Figary with the conditions stipulated, no order for possession shall issue or be executed, the conditions being that Figary discharge and pay to the Minister within a time period to be stipulated in the order of the Court –
(a) all arrears of rent, including rent which is statute-barred, due by Figary to the Minister,
(b) interest on the arrears of rent which are not statute-barred at the statutory court rate from the respective dates on which the same became due, and
(c) the costs of the Minister related to the claim for possession under s. 52 of Deasy’s Act, the basis of quantification to be stipulated in the order of the Court following further submissions from the parties.
161. As regards Figary’s counterclaim against the Minister for damages for breach of statutory duty, Figary has established that the Minister was in breach of statutory duty, being a breach of the rule of European Union law, in preventing the processing of Figary’s claim for grant funding under the Interreg IIIA Programme to a final decision. In consequence, Figary is entitled to be awarded damages for the loss it has incurred consequential on such breach. The said damages are quantified at €450,000.
162. Obviously, provision will require to be made for setting off one against the other –
163. As has been outlined in the course of the judgment, the Court will have to hear further submissions from the parties in relation to the form of order to be made by this Court and, in particular, the extent to which the orders of the High Court require to be varied, or as the case may be, vacated.