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Resort row to go to Supreme Court
24 January 2010 By Kieron Wood
The failed company behind the Blarney Golf Resort is to appeal to the Supreme Court against a High Court judgment refusing to allow it to sue for damages for alleged faulty work by builders.
The €50millionCo Cork resort includes a championship golf course, 56 holiday chalets and a 64-bedroom hotel and conference centre. In September 2008, Kelcar Developments, the owner of the resort, put it up for sale for €20 million, but it failed to sell.
Two months later, Bowen Construction - the lead contractor on the four-star hotel and leisure complex - sued Kelcar in the High Court for more than €5 million.
In a separate High Court action by MF Irish Golf Design Ltd, designers of the golf course, Mr Justice Peter Kelly called the development a ‘‘house of cards’’ and said that Kelcar was insolvent.
Last February, AIB- which is owed about €20million - installed accountant Billy O’Riordan of PricewaterhouseCoopers as receiver over Kelcar Developments.
The hotel and golf club continue to trade, while efforts are made to sell off the development as a going concern.
Different parts of the resort are owned by various individuals and companies. The resort is operated by BGR Limited, a wholly-owned subsidiary of Kelcar Developments. The golf course is owned by Kelcar Lands Ltd, while the clubhouse and hotel belong to a group of private investors.
Eighteen of the cottages have been sold, but the remaining 38 are held by Frank and Derek McCarthy, the shareholders in Kelcar Developments.
Construction work was carried out under a contract between Kelcar Developments and Bowen Construction. Bowen gave warranties to the investors who own the clubhouse and hotel but, although it was agreed that warranties would be given to the cottage owners, that was never done.
Kelcar claimed there were serious defects in the buildings, particularly in the construction of the roofs.
They said it would be claiming substantial compensation, which should be set off against any money owed to Bowen, which denied liability.
The dispute went to arbitration, and the arbitrator asked the High Court whether Kelcar could claim a set-off where the losses had been sustained by individuals and companies which were not parties to the building contract.
Bowen relied on the doctrine of privity of contract - which said that only a party to a contract can sue for any breach.
Counsel for Kelcar claimed that the ‘‘reality of the situation’’ was that all the owners and companies were interconnected, so their separate identities should be ignored.
Mr Justice Sean Ryan, in his judgment, said: ‘‘Kelcar does not have any legal interest in the buildings that have the alleged defects; neither does it operate the resort."
Ryan said there was ‘‘no legal black hole’’ in the case. If Bowen failed to provide warranties to the lodge owners, Kelcar could sue for specific performance, but otherwise the judge said he could not see how Kelcar was entitled to pursue the claims of third parties.
‘‘This is not a case that is within the exceptions to the privity rule.
‘‘To hold otherwise would be to introduce a new ground of exception and would itself produce legal difficulties and potential injustice, including the risk of double liability on the part of the contractor," said the judge.
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