Apperley Investments Ltd v Monsoon Accessorize Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Denis McDonald
• Judgment Date: 20 October 2020
• Neutral Citation: [2020] IEHC 523
• Date: 20 October 2020
• Court: High Court
• Docket Number: [2019 No. 6256 P]

BETWEEN

APPERLEY INVESTMENTS LIMITED, TAILWIND INVESTMENTS LIMITED

AND

MARTINA INVESTMENTS LIMITED

PLAINTIFFS

AND

MONSOON ACCESSORIZE LIMITED

DEFENDANT

AND

BETWEEN

R.E.S.A.M. CORK U.C. AND R.E.S.A.M. PROPERTIES LIMITED

PLAINTIFFS

AND

MONSOON ACCESSORIZE LIMITED

AND

MONSOON ACCESSORIZE IRELAND LIMITED

DEFENDANTS

[2020] IEHC 523

Denis McDonald

[2019 No. 6256 P]

[2019 No. 5745 P]

THE HIGH COURT

COMMERCIAL

JUDGMENT of Mr. Justice Denis McDonald delivered on 20 ^th October, 2020

Introduction 3

Relevant facts 7

The effect of the CVA on the leases 9

The objections of the Cork and Dublin landlords 11

The approval of the CVA at the creditors' meeting 15

The legal effect under the UK Insolvency Act of the approval of the CVA 16

The commencement of proceedings in Ireland by the Cork and Dublin landlords 19

The Recast Insolvency Regulation 20

Article 7 23

Article 11 24

The interaction between Article 7 and Article 11 27

The arguments as to the meaning and effect of Article 11 29

The obligation on the court to recognise and give effect to the CVA 36

Article 19 36

Article 20 37

Article 32 38

Discussion and analysis of the issues which arise in respect of Article 32 39

The effect of the obligation imposed by Article 32 to recognise the CVA 52

The public policy exception under Article 33 57

The case made by the Irish landlords under Article 33 64

The procedural fairness issue 65

The failure to give the Irish landlords an opportunity to be heard before the votes of creditors were cast 77

The suggestion that the availability of a court challenge cured any want of fair procedures 79

Conclusion in relation to public policy 84

Estoppel 85

The guarantee claim against MAIL 87

The relief to be granted 92

Introduction

1 In circumstances where the principal issues which arise for consideration in both of the above proceedings are identical, both sets of proceedings were directed to be tried together. The trial took place before me, by way of a remote hearing, on 19 ^th and 20 ^th May, 2020. Although both proceedings were commenced by plenary summons, the hearing, save to a very limited extent took place on the basis of affidavit evidence. There is substantial agreement between the parties as to the underlying facts. The only significant factual dispute which arose between the parties was in relation to certain aspects of English law. In circumstances where the parties sought to rely on English law to some extent in support of their respective positions, English law (like any other foreign law) falls to be proved as a matter of fact.

2 The relevant details concerning the parties are as follows:-

(a) Apperley Investments Ltd and its co-plaintiffs in the first set of proceedings are the landlords of premises occupied by the defendant at 74 Grafton Street, Dublin 2 (“the Dublin premises”) under the terms of a lease dated 10 ^th February, 2005 made initially between Michael Enoch, Lorraine Enoch and Martina Investments Ltd trading as The Town Partnership as landlord and the defendant as tenant ( “the Dublin lease”). The Dublin lease is for a term of 25 years from 20 ^th August, 2004. The reserved basic rent was initially €750,000 which was subject to review on 1 ^st March 2009, 1 ^st March 2014 and 1 ^st March 2019. The rent has since been reviewed and now stands at €825,000 per annum as from 1 ^st March 2014. Apperley Investments Ltd and its co-plaintiffs ( “the Dublin Landlords”) now hold the lessor's interest in the Dublin lease.

(b) The defendant, Monsoon Accessorize Ltd (“Monsoon”) is a company organised and existing under the laws of England & Wales. In the course of 2019, it underwent a company voluntary arrangement ( “CVA”) in England under the terms of the Insolvency Act, 1986 (UK) ( “the UK Insolvency Act”) which took effect on 3 ^rd July, 2019. By its terms, the CVA purported to modify certain provisions of the Dublin lease (and the Cork lease as described below) and in particular it purported to effect very significant reductions in the amount of rent payable by Monsoon under the Dublin lease.

(c) R.E.S.A.M. Cork U.C. and its co-plaintiff in the second set of proceedings ( “the Cork landlords”) are the landlords of the premises situated at 35, 36 and 37 Patrick's Street, Cork ( “the Cork premises”) which are the subject of two leases. The first named plaintiff in these proceedings is the owner of that part of the freehold of those premises which are the subject of a lease dated 26 ^th May, 1977 ( “the 1977 lease”) between Cordelia Investments, as landlord, and Associated Restaurants (Ireland) Ltd, as tenant. The 1977 lease was for a term of 33 years from 1 ^st February, 1977 subject to the initial yearly rent of IR£15,000. The tenant's interest under the 1977 lease was subsequently transferred to the second named defendant in the proceedings (“ MAIL”) which is an Irish company with a registered office at the address of the Dublin premises above. In turn, the tenant's interest was assigned by MAIL to Monsoon which is the same entity as the defendant named in the Dublin proceedings.

(d) The second named plaintiff is the owner of the freehold in the remaining interest in 35, 36 and 37 Patrick's Street, Cork which is the subject of a lease dated 26 ^th January, 2005 made between the second named plaintiff as landlord and MAIL as tenant ( “the 2005 Lease”). Under the 2005 Lease, Monsoon was named as guarantor. However, on 21 ^st June, 2013, the tenant's interest under the 2005 Lease was assigned to Monsoon. As part of that arrangement, MAIL guaranteed the due performance of the 2005 Lease by Monsoon.

(e) The total annual rent payable under both the 1977 and the 2005 leases is €735,000.

(f) Although MAIL is no longer a tenant of the Cork premises, it is pursued by the plaintiff pursuant to the guarantees given by it in 2013 in respect of Monsoon's obligations as tenant under both the 1977 Lease and the 2005 Lease. In due course, it will be necessary to examine the terms of the guarantees in more detail. It should be noted that both guarantees are governed by Irish law. It should also be noted that MAIL was not a party to the CVA involving Monsoon.

3 Subsequent to the hearing in May 2020, I was informed in June 2020 that Monsoon had been placed in administration in the United Kingdom and that MAIL had been placed in liquidation in Ireland. Notwithstanding these events, I was nonetheless requested to complete my judgment on the basis that the issues raised in the proceedings were said to be important and it was also suggested that, in any event, my judgment on the issues would assist in the quantification of the claims to be made by the Cork and Dublin landlords in the administration of Monsoon and in the liquidation of MAIL respectively. In addition, it was submitted that a judgment remained necessary in order to address the liability for the costs of these proceedings. Thus, although there was no longer any urgent need to deliver judgment, I agreed to prepare a judgment addressing the issues which were debated before me in May 2020.

4 The main claim made both in the Dublin proceedings and in the Cork proceedings is a declaration that the terms of the leases continue in full force and effect and are unaffected by any modification arising under the terms of the CVA. In the alternative, a declaration is sought pursuant to Article 33 of Regulation (EU) 2015/848 of 20 ^th May, 2015 on Insolvency Proceedings (Recast) (which I will refer to either as “the Recast Insolvency Regulation” or “the Regulation”) that the CVA, insofar as it purports to effect any variations of or modifications to the terms of the leases, is not entitled to be recognised or enforced in the State on the grounds that its enforcement would be manifestly contrary to the State's public policy.

5 Specific performance is also sought of the leases (in their unmodified terms) as against Monsoon. In addition, insofar as the Cork proceedings are concerned, a declaration is sought that the obligations of MAIL, as a surety, in respect of the 1977 and 2005 Leases are not released, determined, discharged or in any way lessened by any purported variation of those leases pursuant to the CVA.

6 In response, Monsoon has defended the proceedings on the basis that, pursuant to Articles 19, 20 and/or 32 of the Recast Insolvency Regulation, the court is required to recognise and enforce in full the terms of the CVA. In addition, objection is taken on the basis that none of the plaintiffs sought to challenge the terms of the CVA before the courts of England & Wales whether pursuant to s. 6 (1) of the UK Insolvency Act or otherwise and that the initiation or prosecution of these proceedings by the plaintiffs is prohibited by the doctrine of res judicata, the doctrine of issue estoppel and/or the rule in Henderson v. Henderson (1843) 3 Hare 100.

7 In reply, the plaintiffs have alleged that Monsoon and MAIL are estopped from objecting to the institution and prosecution of these proceedings in Ireland by reason of the contents of a letter sent by its Birmingham Solicitors, Messrs. Shoosmiths, on 2 ^nd July, 2019. That letter was sent in response to letters sent by the solicitors acting for the respective Cork and Dublin plaintiffs on 30 ^th June, 2019 and 1 ^st July, 2019 in which issues were raised in respect of the operation of Article 11 of the Recast Insolvency Regulation. In response, Messrs. Shoosmiths stated that, if the position taken in the correspondence from the plaintiff's solicitors is correct with regard to Article 11, then the proposed CVA “is of no effect in relation to the Lease.” The correspondence in question is addressed in more detail below.

Relevant facts

8 Before addressing the legal issues in any more detail, it is necessary to summarise the relevant facts. Although the parties are in dispute as to the effect of the guarantees given by MAIL (and as to the effect of...