The Gallagher building group paid a non-refundable deposit of £300,000 to Mr Charles and Mrs Maureen Haughey for land at their Kinsealy home which was never sold, the Moriarty tribunal heard yesterday.
Counsel for the tribunal, Mr John Coughlan SC, said the agreement reached between the company, controlled by Mr Patrick Gallagher, and the Haugheys in January 1980 for the sale of 35 acres of land at £35,000 per acre had "a number of unusual features".
Although it involved a sum totalling £1.225 million, the contract did not appear to have been prepared by a solicitor. It also only ran to seven paragraphs and did not contain the usual conditions found in most contracts on the sale of land.
Mr Coughlan said the agreement "appears even more curious" when it was taken into account that the land was sold for £35,000 per acre without the benefit of planning permission in an area zoned for agricultural use.
He said the tribunal would be asking whether the transaction constituted a payment to Mr Haughey or whether it was connected to the settlement of the former Taoiseach's £1.14 m debt with AIB in January 1980.
The tribunal was shown a copy of the land agreement which had been acquired from Mr Lawrence Crowley, a chartered accountant and formerly a partner in Stokes Kennedy Crowley, who was in April 1982 appointed receiver to the Gallagher group.
The contract, dated January 27th, 1980, was signed by Mr Haughey, his wife Maureen, and "P Gallagher". It set a condition that the purchaser "will provide the vendor with a stud farm of at least 60 acres of land with appropriate stables and within a radius of 20 miles of the GPO preferably in north Co Dublin. The new stud farm and the costs thereof will have to be met with the approval of the vendors. The cost of the new stud farm will be deducted from the purchase price."
The contract continued: "the transactions will be completed within six months of the vendors indicating in writing their approval of the new stud farm. The balance of the purchase price will be subject to interest at five points above the Associated Banks' treble A rate for any period after the stipulated completion date during which completion is delayed".
It noted the receipt of the £300,000 deposit and said it would be non-refundable in the event of the transaction not being completed before December 31st, 1985. If this occurred, it said, the Gallagher group would have no further obligation under the agreement.
Mr Coughlan said the stipulation that the stud farm had to meet with the approval of the Haugheys appeared to have left them "with an enormous degree of discretion as to how the agreement should be completed". The contract contained no mechanism for resolving a dispute between the parties.
"This would appear to be all the more unusual when it is borne in mind that the deposit under the agreement was to be non-refundable in the event of the transaction not being completed."
Mr Coughlan said the deposit of roughly 25 per cent of the purchase price appeared to be substantial. A more usual deposit for a sale of this size would be about 10 per cent, and normally refundable.
Mr Coughlan said the agreement did not contain the usual clauses found in most contracts of the sale of land, which were almost invariably along the lines of the standard general conditions of sale of the Incorporated Law Society of Ireland.
He said there appeared to be no record in the Gallagher group files of steps taken in furtherance of the agreement and no correspondence from the Haugheys.
"The contract for sale was never in fact completed and therefore, Mr and Mrs Haughey had received £300,000 which they were not obliged to refund." They were also released from any obligation to give any land to the Gallagher group, said Mr Coughlan.
He said the transaction was eventually treated by the Revenue Commissioners as a gain by the Haugheys which, at the appropriate time, was subject to a tax charge. This charge was paid.
Mr Coughlan said the tribunal had been in contact with Mr Gallagher and, contrary to initial impressions, it now appeared he might be able to give evidence.
Mr Coughlan said the tribunal was not in a position to establish a connection between the land agreement and the funding of £750,000 in settlement of Mr Haughey's debt with AIB. However, the deal will be scrutinised because of its "close, temporal" connection with the settlement, said Mr Coughlan.
