Rugby, property, and the interpretation of contracts

Rugby BallPerhaps rugby is replacing property as the Irish obsession du jour. There are many ways in which they overlap. For example, during the property boom, it was not uncommon for sports clubs to sell off some of their lands to developers, in return not only for the cash but also for improved facilities provided by the developers. Just such a transaction was at issue in Hannon v BQ Investments [2009] IEHC 191 (24 April 2009). A rugby club sold some of its property, and the special conditions of sale provided that the developers would grant the club a right of way over the lands being sold to access the club’s remaining property. In particular, special condition 10 provided

There will be reserved in favour of the [club] for the use of the … pitches and the clubhouse a right of way over the roadway having a width of six metres with a footpath on both sides and appropriate public lighting with the location of the said right of way to be decided upon by the [developer] who will consult with the [club] on the Planning Application with regard to the location of the said right of way.

The basic question for the court was whether the developer’s obligation to construct the road arose simply on the completion of the transfer of the property, or was in some sense conditional upon the club putting in “the … pitches and the clubhouse”. The most important recent statement of the principles by which courts interpret contracts is the speech of Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, [1997] UKHL 28 (19 June 1997), which has been followed in Ireland by the Supreme Court in Analog Devices v Zurich Insurance Company [2005] IESC 12 (16 March 2005) and Emo Oil Limited v Sun Alliance & London Insurance Company [2009] IESC 2 (22 January 2009). The fifth Investors Compensation principle provides:

(5) The “rule” that words should be given their “natural and ordinary meaning” reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had.

Having quoted this principle, Laffoy J held that nothing had gone wrong with the language in special condition 10 and that it must be interpreted on the basis of the natural and ordinary meanings of the words. Unlike Charleton J in National Tourism Development Authority v Coughlan [2009] IEHC 53 (17 February 2009), Laffoy J therefore began simply with the words of the document (and not, for example, with a ritual – and meaningless – reference to the intentions of the parties). As Lord Hoffmann explained in the Investors Compensation case:

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

In the event, in Hannon, Laffoy J held that, as a matter of interpretation, the liability of the defendant on foot of special condition 10 arose on the completion of the sale, and not at some later date when the club would have put down the pitches and built the clubhouse:

To the extent that special condition 10 imposed an obligation on the defendant to construct a road, and it is admitted by the defendant that it did impose such an obligation, in my view, giving the words in the special condition their natural and ordinary meaning, they do not provide that the defendant’s contractual liability to construct the road has not arisen yet because there is no clubhouse on the retained lands. The words “for the use of the … pitches and the clubhouse” in special condition 10 are expressly connected with the reservation of the right of way in favour of the plaintiffs, not with the construction of the road. Although not spelt out, the necessary implication is that the reservation is in favour of the plaintiffs and their successors as the owners for the time being, and for the benefit, of the retained lands. The dominant tenement is the retained lands and the exercise of the easement, which was created by the reservation in the Transfer, is, according to special condition 10, limited to the use of the retained lands as a sporting facility, not, say, as an abattoir or a nuclear power station or whatever. That interpretation fully accords with, and does not in any way flout, business common sense. To read special condition 10 as having the meaning urged by the defendant – that the roadway to be constructed is to be constructed “for use of the … pitches and clubhouse” – would involve re-writing it and, thereby, re-writing the parties’ bargain.

Accordingly, on the basis of the defendant’s admission that it is obliged to construct a roadway on the right of way strip, I find that, by not having done so, the defendant is in breach of contract

The case illustrates two things. It is a good illustration of the interpretation of contracts. Second, it demonstrates the primacy of rugby in the current Irish zeitgeist!