McGrath v Stewart: After 138 years, the systems of common law and equity are not yet fused

Here, the Supreme Court (Laffoy J) held that, after one hundred and thirty eight years since the Judicature Acts, the systems of common law and equity “are not yet fused”, therefore “the doctrine of laches has … no application to a claim at common law for damages for breach of contract where that claim is not otherwise barred by the Statute of Limitations” [34]. However, the High Court had erred in making an order for damages in lieu of specific performance of a contract for the sale of property, where McGrath’s claim for specific performance (equitable remedy) was defeated by a defence of laches (delay) and he had not sought damages for breach of contract at common law.

Background

In 1998, McGrath contracted to purchase residential property from Stewart, with vacant possession. Stewart informed McGrath afterwards of sitting tenants and refused to complete the sale except with the tenants in place. In 2004, McGrath issued High Court proceedings seeking specific performance or damages in lieu of specific performance. But he did not seek damages for breach of contract at common law. In 2008, the High Court (here) found that McGrath’s claim for specific performance was defeated by Stewart’s defence of laches. But the trial judge (Murphy J) made an award of damages in lieu of specific performance.

Stewart appealed that decision to the Supreme Court.

Laffoy J narrowed Stewart’s grounds of appeal down to one valid issue: was the High Court trial judge acting within his power in making an award of damages in lieu of specific performance where he had found that the claim for specific performance was defeated by a defence of laches?

McGrath’s response relied largely on Duggan v Allied Irish Building Society (Unreported, High Court, Finlay J, 4th March 1976). There, the High Court awarded Duggan damages for breach of contract in common law in lieu of specific performance of a loan offer to be secured by a mortgage, even though he was not entitled at law to specific performance of an agreement to make an advance.

However, Laffoy J distinguished McGrath’s case from Duggan, as McGrath had not sought damages at common law in his plenary submissions to the High Court, and he could not, therefore, pursue that claim on appeal. Therefore, the issue was whether the trial judge could make an equitable award of damages for breach of contract at common law.

Laffoy J looked to Meagher v Dublin City Council [2013] IEHC 474, where Hogan J held that a defence of laches cannot defeat a claim for damages for breach of contract at common law. Of significance for this case was that Hogan J had reviewed the jurisprudence since the Supreme Court of Judicature Act 1887, which aimed to fuse the common law with equity. He found that, although the systems of common law and equity work closely and draw inspiration from each other, they “are not yet fused”. Laffoy J agreed with that that statement [34].

Allowing Stewart’s appeal, Laffoy J held that, as the defence of laches defeated McGrath’s claim for specific performance, the trial judge erred in making an award in lieu of specific performance. And as McGrath had not sought damages for breach of contract at common law, the trial judge could not have made an award on those grounds.

 

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