THE HIGH COURT
			1999 No. 5327P
BETWEEN
CYRIL FORBES
			PLAINTIFF
AND
JOHN TOBIN AND JANET TOBIN 
			DEFENDANTS
JUDGMENT of Mr. Justice McCracken delivered the 8th day of March, 2001.
	In these proceedings the Plaintiff seeks specific performance of a contract for sale dated 12th March, 1998 whereby the Defendants agreed to sell and the Plaintiff agreed to purchase for the sum of £180,000 certain premises described as:-

“ALL THAT AND THOSE the lands and hereditaments being the garage premises at Inistioge situate in the barony of Gowran and County of Kilkenny and more particularly delineated on the map attached hereto and thereon outlined in red”

		At the time of signing the contract there was a business carried on in the premises of a filling station, a shop and a small workshop.  The First Defendant had entered into several agreements with Burmah-Castrol (Ireland) Limited in relation to the supply of motor fuels and the provision of equipment including a canopy, electric pumps, an over ground diesel tank and certain instruments which were clearly stated to remain the property of Burmah-Castrol (Ireland) Limited.  The dealer supply agreement also contained certain provisions as to the procedures to be followed if the Defendants sold the premises, which I will deal with later.  
		Special condition (7) in the contract provided:- 

“In addition to the purchase price, the purchaser shall pay to the vendor an amount equivalent to such value added tax as shall be exigible in relation to the sale, same to be calculated in accordance with the provisions of the Value Added Tax Act 1972 and to be paid on completion of the sale forthwith upon receipt by the purchaser of an appropriate invoice (whichever be the later)”

		The general conditions of sale were the standard 1995 edition of the Law Society of Ireland conditions, including the following:-

“40. Save where time is of the essence in respect of the closing date, the following provisions shall apply:
(a)	If the sale be not completed on or before the closing date either party may on or after that date (unless the sale shall first have been rescinded or become void) give to the other party notice to complete the sale in accordance with this condition, but such notice shall be effective only if the party giving it shall then either be able, ready and willing to complete the sale or is not so able, ready or willing by reason of the default or misconduct of the other party 
(b)	Upon service of such notice the party upon whom it shall have been served shall complete the sale within a period of 28 days after the date of such service (as defined in condition 49 and excluding the date of service), and in respect of such period time shall be of the essence of the contract but without prejudice to any intermediate right of recision by either party
(c)	The recipient of any such notice shall give to the parties serving the same reasonable advice of his readiness to complete 
(d)	If the purchaser shall not comply with such a notice within the said period (or within any extension thereof which the vendor may agree) he shall be deemed to have failed to comply with these conditions in a material respect and the vendor may enforce against the purchaser, without further notice, such rights and remedies as may be available to the vendor at law or in equity, or (without prejudice to such rights and remedies) may invoke and impose the provisions of condition 41
(e)	The vendor shall not be deemed to be other than able, ready and willing to complete for the purposes of this condition: 
	.........................................................................................................................
	(ii) By reason of being unable, not ready or unwilling at the date of service of 		such notice to deliver vacant possession of the subject property provided that 		(where it is a term of the sale that vacant possession thereof be given) the 		vendor is, upon being given reasonable advice of the other party’s intention to 	close the sale on a date within the said period of 28 days or any extension 		thereof pursuant to condition 40(f), able, ready and willing to deliver vacant 		possession of the subject property on that date”

	General condition 41 then provided that if the purchaser should fail in any material respect to comply with any of the conditions, the vendor should be entitled to forfeit the deposit and be at liberty to re-sell the property.
	A serious dispute arose between the Solicitors for the respective parties as to whether value added tax was in fact exigible, and therefore as to whether the Plaintiff was bound to pay value added tax to the Defendants in addition to the purchase price.  The Plaintiff maintained that no value added tax was payable and actually put his Solicitor in funds to complete the sale on the basis of the purchase price of £180,000.  The Defendant’s Solicitors refused to compete on this basis and initially served a completion notice pursuant to condition 40 on 26th January, 1999.  This was not acted upon, and a further notice was served dated 2nd March, 1999 this notice recites the contract and then continues:-

“TAKE NOTICE that the vendors being ready, willing and able to complete this sale hereby call upon the purchaser in accordance with general condition      of the contract herein to complete the sale within 28 days from the date of service hereof.
	AND TAKE FURTHER NOTICE that if the purchaser shall fail to so complete the sale within the said period the vendors intend to enforce against the purchaser  such rights and remedies as maybe available to the vendors at law or in equity and/or on foot of, but not limited to, the provisions of the general conditions of the contract for sale herein.
	AND TAKE FURTHER NOTICE that if the purchaser shall fail to so complete this sale within 28 days from the date of service in respect of which such period time shall be of the essence, the purchaser will be deemed to have failed  to comply with the conditions as set out in the aforesaid contract for sale and the provisions of clause 41 of the general conditions of the said conditions of sale will apply accordingly and the deposit paid herein shall be absolutely forfeited and the remaining provisions of clause 41 aforesaid of the said conditions of sale shall apply”.

	The service of this notice was preceded by lengthy correspondence between the Solicitors for the parties in which the Defendants Solicitors maintained that the contract was for the sale, not only of the premises, but of the business being carried on therein by the Defendants.  On the other hand, the Plaintiff’s Solicitor at all times maintained that this was purely a contract to purchase buildings, and that there never had been any question of a purchase of a business.  This dispute as to the nature of the contract lead to two demands being made by the Defendant’s Solicitors.  Firstly, they contended that value added tax was payable because this was the sale of a business, and secondly they contended that the Plaintiff was also bound to take over the agreements between the Defendants and Burmah-Castrol (Ireland) Limited.  Both of these contentions continued to be maintained by the Defendant’s Solicitors up to and after the date of the service of the completion notice.
	The Defendant’s Solicitor gave evidence that in a telephone conversation on 8th March, 1999 he acknowledged to the Plaintiff’s Solicitor that this was only a sale of property and not the sale of a business, but unfortunately in a letter dated 9th March the Defendant’s Solicitors make no mention of this, but continue to demand  payment of value added tax and also to contend that the Plaintiff had verbally agreed to assume liability for the agreements with Burmah-Castrol (Ireland) Limited.  This letter purported to enclose a copy letter of 2nd March, 1999 from the inspector of taxes in relation to the value added tax position, but in fact did not enclose that letter.
	By letter of 11th March, 1999 the Plaintiff’s Solicitors contested the validity of the completion notice on the basis that:-

“Our client is ready, willing and able to complete.  It is your client who is refusing to complete under the terms of contract by:-
(a)	Requiring VAT to be paid, when there is no liability on our client to do so;
(b)	Requiring our client to take over liability for the oil company agreements when there is no obligation on our client to do so;
(c)	Requiring interest on the purchase money when our client has no liability for same”
	By letter of 19th March, 1999 the vendors Solicitors continued to maintain that value added tax was payable, but stated for the first time that they were not requiring the Plaintiff to take over the liability for the oil company agreements.  This letter again makes no mention of withdrawing the claim that this was a sale of a business.  By letter dated 22nd March the Plaintiff’s Solicitors state:-

“Your clients claim that our client is liable for VAT rests entirely on your clients contention that the contract is one for the sale of the business as a going concern and therefore VAT is exigible.  The contract is not one for the sale of the business as a going concern and therefore our client is not liable for VAT for that reason.  If there is some other reason why the property carried a properly exigible VAT liability then please tell us what that is so that we can address the matter.  To date no such reason has been advanced by your clients.”

	This letter also points out that there are still goods on the property belonging to Burmah-Castrol (Ireland) Limited and points out that they must be removed from the property so that vacant possession can be given.
	By further letter of 30th March, 1999 the Defendant’s Solicitors state that the completion notice will expire on that day and, for the first time in correspondence with the Plaintiff’s Solicitor, expressly state that they are no longer maintaining that VAT is chargeable by virtue of the fact that it is the sale of a business, but maintaining that VAT was still chargeable.
	Unfortunately this rather lengthy correspondence which took place over several months could probably be described as a comedy of errors.  The contract for sale on its face is clearly only a contract for the sale of property, and does not include any of the standard clauses which one would expect on the sale of a business as a going concern.  This was pointed out to the Defendant’s Solicitors on a number of occasions, but they refused to accept it.  On the other hand, the Plaintiff’s Solicitors appeared to have been operating under a totally mistaken apprehension as to liability for value added tax on the sale of property.  Liability for value added tax does arise on the sale of a business as a going concern where the purchaser is not  himself registered for value added tax, but it is also payable under certain circumstances where property has been developed in whole or in part after 31st October 1972, and this appears to have been ignored by the purchaser’s Solicitor until after the service of the completion notice.  This maybe understandable, because of the basis on which the vendor’s Solicitor were claiming value added tax, but the fact remains, and it now seems to be conceded, that value added tax is payable on the transfer of an interest in property where there has been a development of that property by or on behalf of the vendor subsequent to 31st October, 1972 in circumstances where the vendor was entitled to recover any part of the value added tax chargable to him on the purchase or redevelopment of the property.
	The facts relating to the property in the present case are that the Defendants expended some £3,000 on what would be a development of the property within the meaning of the Value Added Tax Act, that when the Defendants purchased the property they did not pay any value added tax, that their predecessors in title had expended some £17,000 in the development of the property prior to its purchase by the Defendants, and that the Defendants, and presumably their predecessors, would have been in a position to obtain a refund of value added tax paid by them on the development of the property.  The position has now been made even more clear by a letter from the Revenue Commissioners dated 6th February, 2001 in which they restate their opinion that value added tax is payable. 
	 It must be said in fairness to the Plaintiff’s Solicitors that, while at some stage they became aware of the £3,000 expended by the Defendant shortly after the service of the completion notice, they did not become aware of the expenditure of the £17,000 until after the completion notice had expired.  
	A further complication arises because there is a rule of thumb applied by the revenue authorities that if the amount expended on a development is less than 10% of the purchase price, they do not in fact seek to enforce a claim for value added tax.  However, in my view this has no legal significance, as this is a statutory tax, and under the terms of the Value Added Tax Act the liability still exists, and in my view quite clearly the tax is “exigible” within the meaning of clause 7 of the special conditions of sale.  In any event, if one takes into account the £17,000 expended by the Defendants predecessors, this clearly well exceeds 10% of the purchase price paid by the Defendants. 
	Probably the last chapter in the comedy of errors is that the Defendant’s Solicitors  served completion notices on two occasions in both of which the Plaintiff was called to complete within 28 days from the date of service of the notice, which is not in accordance with general condition 40, and is not sufficient notice under that provision.
	The above facts give rise to a number of issues.  Clearly the first of these is whether, when the Plaintiff issued the proceedings, he himself was ready, willing and able to complete in accordance with the terms of the contract.  He was refusing to pay the value added tax, and it now transpires the transaction is subject to value added tax, although not on the basis on which it was originally claimed by the Defendants.  Indeed, it is only in very recent times, and subsequent to the issue of these proceedings, that the question of the expenditure of the £17,000 on the property became known to the parties.  However, at the time the proceedings were issued the Plaintiff clearly was aware of the expenditure of the £3,000 by the Defendants, but he relied on the 10% rule of thumb to excuse payment.  As I said, this is merely a rule of thumb and is not a legal provision, and therefore technically there was a liability for value added tax at all times.  Furthermore, the Plaintiff was informed by the Defendants that the revenue authorities had advised that value added tax was payable.  The Defendants were entitled to act on such advice, and of course assuming that advice was correct, the Defendants would be liable to the revenue for the value added tax whether they recovered it from the Plaintiff or not.  There is, therefore, the very odd situation that the Defendants appear to have been correct all along in requiring value added tax, but for all the wrong reasons.  In my view, therefore, and with some reluctance, I must find that the Plaintiff is not entitled to an order for specific performance, because his refusal to pay value added tax meant that he was not willing to close in accordance with the contract.
	The second issue is the validity of the Defendants completion notice.  I would be of the view that the error in dates in the completion notice is not fatal, as condition 40 does not require any specific length of notice to be stated, but simply requires a notice to be served and then provides that completion shall take place within 28 days after the service excluding the date of service.  I also do not think that the notice could be condemned because there was property belonging to Burmah-Castrol (Ireland) Limited still on the premises which prevented vacant possession being handed over, as condition 40(g)(ii) appears to expressly envisage this situation.
	On the other hand, the question must be asked as to whether, at the time of service of the notice, the vendors themselves were ready, willing or able to complete.  The only basis upon which they were so willing was that the Plaintiff should pay value added tax, should take over the oil suppliers agreement and should pay interest.  While they may have been correct in relation to value added tax, for the wrong reasons, quite clearly there was no obligation on the Plaintiff to take over the Burmah-Castrol (Ireland) Limited agreements, and in my view, as value added tax had been claimed on the wrong basis, there was probably no liability to interest.  For this reason at the time of service of the completion notice the Defendants were not willing and able to complete in accordance with the contract, and therefore it follows that condition 41 did not apply and the Defendants were not entitled to forfeit the deposit of £18,000 paid on foot of the contract.  The Plaintiff has sought an injunction restraining the Defendants from forfeiting the deposit, and it has also sought damages.  As I have found that the contract was not properly rescinded by the Defendants, and there was no right to forfeit the deposit, logically it must follow that the contract is still in existence.  However, the granting of specific performance is an equitable remedy, and I certainly would not grant specific performance at this stage even if the Plaintiff were prepared to pay the value added tax, as I would consider it inequitable to do so.  However, the Plaintiff has been at a loss of £18,000 for some two years and I think justice would be done between the parties if I make an order refusing specific performance, declaring the contract for sale now to be rescinded and granting an injunction restraining the Defendants from forfeiting the deposit and ordering the repayment by the Defendants to the Plaintiff of the said deposit of £18,000 together with interest thereon at Courts Act rates from the date of the contract, which I understand to be 12th March, 1998.
	A number of authorities were open to me by Counsel on both sides of this case, and I mean no disrespect to them by not citing such authorities.  However, I feel that the facts of this case are so unusual as to make it extremely difficult to fit them within any of the recognised authorities.

fgcforbes5327p(JMC)