Ethafil Ltd (in Voluntary Liquidation) v Express Bus Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Eileen Roberts
• Judgment Date: 15 August 2023
• Neutral Citation: [2023] IEHC 506
• Court: High Court
• Docket Number: 2021 No. 6247P

Between

Ethafil Limited (In Voluntary Liquidation)

Plaintiff

and

Express Bus Limited

Defendant

[2023] IEHC 506

2021 No. 6247P

THE HIGH COURT

Settlement agreement – Enforcement – Undertaking – Plaintiff seeking to re-enter proceedings for the purposes of enforcing a settlement agreement – Whether the defendant had breached its undertaking

Facts: The plaintiff, Ethafil Ltd (in voluntary liquidation), applied to the High Court to re-enter proceedings for the purposes of enforcing a settlement agreement entered into between the parties on 13 October 2022. Counsel for the plaintiff said that the defendant, Express Bus Ltd, in committing to deliver up “clear and vacant possession” of a property known as Birmayne House, Mulhuddart, Dublin 15 in fact committed not only to itself vacate the property but also to ensure that all occupiers (and particularly those whom it identified and permitted to occupy the property) would also vacate the property by the agreed date. He said the undertaking given by the defendant was a stand-alone undertaking to deliver clear and vacant possession. He said that clause 9 of the settlement agreement envisaged the need for all occupants (and not just the defendant) to vacate the property. While there was a difference in terminology between clause 2 which referred to “the Occupiers” and clause 9 which referred to “any of the Occupants”, he said it was clear that those clauses were intended to mean the same parties. He said the plain meaning and effect of clause 9 was that if the defendant or any of the occupants (being, he said, at least those parties identified in clause 2) did not vacate the property “in accordance with clause 2”, then the defendant must pay an agreed contribution of €50,000 towards the plaintiff’s legal costs. The arguments advanced by the defendant were that: (1) it had not breached its undertaking; and/or (2) it had taken all steps open to it to procure compliance with the undertaking; and/or (3) that part of clause 9 of the settlement agreement which purported to impose a €50,000 penalty was not enforceable.

Held by Roberts J that on a plain reading of the settlement agreement it required the defendant (and its named related entities who were parties to the settlement agreement) to vacate the property by 31 December 2023. She held that it did not compel the defendant to return possession of the property to the plaintiff free from the other identified occupiers; nor did the defendant have any legal right or entitlement to require the occupiers to vacate the property in which it had no legal or beneficial interest. She held that the failure of the defendant to secure the removal of the other identified occupiers did not constitute a breach of contract by the defendant. She held that had the defendant itself failed to vacate, then this would amount to a breach of contract by the defendant (and likewise for the related entities who were parties to the settlement agreement).

Roberts J held that had there been a breach of contract by the defendant, the payment provisions in clause 9 of the settlement agreement would constitute a penalty clause and would thus be unenforceable in circumstances where the amount specified was a payment of money stipulated as in terrorem of the defendant and in terms which could not be deemed to be a genuine pre-estimate of any damages the plaintiff was likely to sustain in the event of the defendant (or its related entities) failing to vacate the property by 31 January 2023. Recognising that penalty clauses arise in the context of a breach, she considered if clause 9 could be triggered and enforced merely by the existence of any of the other unrelated identified occupiers remaining on the property after 31 January 2023. The specification in the clause of the occupants not delivering vacant possession “in accordance with clause 2 above”, led her to the view that the clause was not worded in terms that were clear enough to permit the payment specified to be recovered as an agreed payment on the basis of a stand-alone covenant by the defendant unrelated to any breach on its part. She held that there was no part of clause 2 which provided a mechanism for the occupants (or occupiers) to have to vacate the property.

Judgment approved.

JUDGMENT of Ms. Justice Eileen Roberts delivered on 15 August 2023

Introduction

1 . This is the plaintiff's application to re-enter these proceedings for the purposes of enforcing a settlement agreement entered into between the parties on 13 October 2022 (the “ Settlement Agreement”). The question before the court in this application is whether, in the circumstances which developed after the Settlement Agreement, the plaintiff can now recover from the defendant the payment specified in clause 9 of the Settlement Agreement.

The parties and the background to this dispute

2 . The plaintiff is the registered owner of a property known as Birmayne House, Mulhuddart, Dublin 15 (the “ Property”). The plaintiff is an insolvent company in voluntary liquidation and Mr Myles Kirby was appointed as liquidator (the “ Liquidator”) of the plaintiff on 19 June 2019.

3 . The defendant was granted a lease of part of the Property (which part is described as “ Lot 2”) by the previous owners of the Property on 15 May 2012 for a term of three years at a rent of €35,000 per annum. The defendant renounced any entitlement to a new tenancy by deed of renunciation of the same date.

4 . On 19 February 2015 the defendant signed a contract to buy the Property from its previous owners. The plaintiff was at that time a subsidiary of the defendant. An agreement was entered into between the plaintiff, the defendant, Kathleen Martin (being at that time a director of both the plaintiff and the defendant) and a Mr Jon Griffin who was to procure funding for the purchase. That agreement (the “ 2015 Agreement”) identified a series of transactions to be entered into by the parties to it. Those transactions included that the plaintiff would grant a lease of Lot 2 to the defendant for a term of five years. It also provided that the plaintiff would grant an option to the defendant to purchase Lot 2 within the first 12 months of that lease. It also set out circumstances in which that option would lapse.

5 . The Liquidator brought an application pursuant to s. 631 of the Companies Act 2014 seeking directions, in particular regarding the rights of the parties in respect of the option under the 2015 Agreement and whether the plaintiff was in lawful occupation of the Property.

6 . Allen J delivered two judgments in respect of these applications (together, the “ Directions Judgments”).

7 . In his judgment dated 14 May 2021, Kirby v Express Bus Limited [2021] IEHC 334, Allen J found, inter alia, that:

• (a) The plaintiff completed the purchase of the Property on 18 December 2015.

• (b) On 24 December 2015, Kathleen Martin resigned as director of the plaintiff.

• (c) On 24 December 2015, Kathleen Martin was replaced by Jon Griffin as a director of the plaintiff.

• (d) On 25 February 2016, the plaintiff was registered as the owner of the Property.

• (e) The defendant was entitled to a five year lease of Lot 2 and had an option to purchase Lot 2 pursuant to the 2015 Agreement.

• (f) Because the defendant did not pay the rent due under the lease in full or on time, the option to purchase the Property had lapsed by the time the defendant attempted to exercise the option.

8 . In a later and supplemental judgment dated 29 October 2021, Kirby v Express Bus Limited [2021] IEHC 680, Allen J stated, inter alia, that by failing to validly exercise the option it held, the defendant was consequently not in lawful occupation of the Property.

9 . Following that latter judgment, the defendant was requested to deliver up vacant possession of the Property. The defendant did not do so at that time. On 11 November 2021 these plenary proceedings were issued seeking possession of the Property and rent arrears. On 12 November 2021 Allen J granted the plaintiff liberty to issue a motion seeking an interlocutory order for possession of the Property.

10 . The interlocutory motion was settled on agreed terms which were annexed to a Court Order dated 9 December 2021 and received and filed. Those agreed terms confirmed undertakings by the defendant, inter alia, to (1) vacate the Property within 3 months of an Order from the Court of Appeal dismissing the defendant's appeal; (2) make an immediate payment to the plaintiff; (3) commit to pay mesne rates until such time as it vacated the Property (such amounts to be returned to the defendant in the event of a successful Appeal); and (4) make an agreed payment to the plaintiff for arrears if the Appeal was dismissed. The within proceedings and the interlocutory motion were adjourned generally with liberty to re-enter. Insofar as costs were concerned the terms provided that:

“ In the event that the Appeal is dismissed, the Defendant will consent to an Order for costs of the within proceedings in favour of the Plaintiff. In the event the Appeal is successful, the Defendant will be at liberty to make an application for the costs of the within proceedings”.

11 . The Directions Judgments were appealed by the defendant to the Court of Appeal. The appeal included an appeal against the awarding of costs by Allen J to the plaintiff in respect of the Directions Judgments.

12 . On the morning of the hearing date of the appeal of the Directions Judgments, the Appeal “ and all claims howsoever arising concerning the Property…” were settled on the terms recorded in the Settlement Agreement.

13 . The evidence before the court is that on the eve of signing the Settlement Agreement the defendant represented to the plaintiff that there were several other entities also in occupation of the Property with the consent of the defendant. None of these other entities had been disclosed...