The Supreme Court has allowed an appeal by Mark Walsh and Gary Wedick in a dispute with Marlan Homes Limited over mortgage arrangements for a proposed housing development at Kilmore Road, Artane, Dublin.
In a judgment delivered on 30 March 2012, McKechnie J. held that the appellants were not in breach of their agreement with Marlan Homes. The Court set aside the High Court orders, which had found a fundamental breach and rescinded the agreement.
The dispute concerned two agreements. Under a November 2006 agreement, Marlan Homes received a licence to enter the development lands and build 48 homes. It paid €4.825 million upfront, described as non-refundable, with a further €100,000 to be paid over the sale period. The overall site included land owned by Walsh and Wedick and a neighbouring parcel owned by Dublin City Council (DCC).
A December 2006 agreement between the appellants and DCC gave them a conditional right to enter and develop the council land, with a 999-year lease available after specified building work and other conditions. The agreement restricted transfer, while allowing an exception for a mortgage entered into specifically to finance the development.
The November agreement required the appellants, on request, to execute a limited-recourse mortgage or charge over the “subject lands” in a form acceptable to them. The High Court had interpreted this as requiring the appellants to seek DCC’s consent to a mortgage over their interest in the council land. It found that the failure to obtain consent for the Bank of Scotland Ireland facility contributed to the project’s failure and ordered rescission.
On appeal, Marlan Homes supported the High Court’s interpretation, arguing that the mortgage provision had to enable it to obtain effective security for funding. The appellants argued that they had undertaken only to provide a mortgage over the interests they actually held, not to ensure that a lender could realise the council-land interest.
The Supreme Court concluded that the agreements did not require the appellants to provide “effective security” over DCC’s land. Their interest under the council agreement was an agreement for lease, and they could not mortgage or charge the council land as demanded by the bank before the lease conditions were met. The Court said the obligation to fund the development rested with Marlan Homes, as investor, and could not be expanded beyond the written terms.
The Court’s ruling resolves the two appeals arising from the High Court’s preliminary and substantive decisions. It does not determine that the project was completed or address any further remedies beyond setting aside the High Court orders.