Kilarden Investments Ltd v Kirwans (Galway) Ltd (in voluntary liquidation) and Others

JurisdictionIreland
JudgeMs. Justice Laffoy
Judgment Date10 May 2013
Neutral Citation[2013] IEHC 224
CourtHigh Court
Date10 May 2013

[2013] IEHC 224

THE HIGH COURT

[No. 8119P/2011]
Kilarden Investments Ltd v Kirwans (Galway) Ltd (in voluntary liquidation) & Grealish

BETWEEN

KILARDEN INVESTMENTS LIMITED
PLAINTIFF

AND

KIRWANS (GALWAY) LIMITED (IN VOLUNTARY LIQUIDATION), JOHN P. GREALISH AND PAUL GREALISH
DEFENDANTS

REOX HOLDINGS PLC v CULLEN & DAVIDSON UNREP CHARLETON 26.7.2012 2012/39/11855 2012 IEHC 299

LAND & CONVEYANCING LAW REFORM ACT 2009 S132

CONVEYANCING & LAW OF PROPERTY ACT 1881 S14

WYLIE IRISH LAND LAW 4ED 2010 PARA 17.101

KELLY v MURNAGHAN 1948 IR 38

LANDLORD & TENANT LAW AMDT ACT IRL 1860 S3

CONVEYANCING ACT 1881 S14(1)

CONVEYANCING ACT 1881 S14(2)

CONVEYANCING ACT 1881 S14(5)

CONVEYANCING ACT 1881 S14(6)

CONVEYANCING & LAW PROPERTY ACT 1892 S2(2)

CONVEYANCING & LAW PROPERTY ACT 1892 S2(3)

LAND & CONVEYANCING LAW REFORM ACT 2009 (COMMENCEMENT) (SECTION 132) ORDER 2009 SI 471/2009

LAND & CONVEYANCING LAW REFORM ACT 2009 S132(1)

LAND & CONVEYANCING LAW REFORM ACT 2009 S132(2)

LAND & CONVEYANCING LAW REFORM ACT 2009 S132(3)

LAND & CONVEYANCING LAW REFORM ACT 2009 S132(4)

LAND & CONVEYANCING LAW REFORM ACT 2009 PART XIV

LAND & CONVEYANCING LAW REFORM ACT 2009 S131

LANDLORD & TENANT (AMDT) ACT 1980 S3

LAND & CONVEYANCING LAW REFORM ACT 2009 S3

WYLIE THE LAND & CONVEYANCING LAW REFORM ACT 2009: ANNOTATIONS & COMMENTARY 2009

MCDONALD v BORD NA GCON (NO 2) 1965 IR 217 100 ILTR 89

LAND & CONVEYANCING LAW REFORM ACT 2009 S132(2)(B)

LAW OF PROPERTY (MISCELLANEOUS PROVISIONS) ACT 1994 (UK)

LAW OF PROPERTY ACT 1925 (UK)

WELCH v BOWMAKER (IRL) LTD & BANK OF IRELAND 1980 IR 251

Landlord and tenant - Commercial lease - Contractual obligations - Renewal of lease - Extension - Rent arrears - Mesne rate of rent - Period of notice - Landlord and Tenant (Ireland) Act 1860

Facts: The first named defendant held a 20 year lease dated the 22nd February 1999 from the plaintiff of licensed premises at Prospect Hill, Galway. The second and third defendants were guarantors of the guarantee of the lease. The plaintiff initiated proceedings seeking an order of specific performance against the guarantors to execute a lease commencing on either 3rd June, 2011, or, alternatively, on 15th January, 2011 and terminating on 21st February, 2019 at a rate of €10,220.40 per week and on the same terms and conditions of the former lease. Alternatively, damages in lieu of specific performance was sought. There was also a claim of all sums due by the defendants to the plaintiff in respect of arrears of rent and insurance under the lease. Following the judgment of the court on the 26th March 2012, the plaintiff was awarded €107,443 for the unpaid rent and insurance. The plaintiff also indicated that it was no longer seeking specific performance as a new tenant had been found albeit at a reduced rent, instead focusing on damages in lieu of specific performance solely.

The plaintiff claimed that by signing the lease guarantee, the guarantors were obliged to indemnify any claims that arose as a result of a default on the part of the first defendant. Clause (7) of the Guarantee stated that if the first defendant was to enter liquidation resulting in a surrender of the lease, the guarantors would execute a new lease with the plaintiff for the remainder of the original lease”s 20 year period within 12 months. Such a scenario came about in June 2011. The guarantors argued that because there was no payment of rent after the 3 rd May 2010, by the 13 th May 2010 had ceased meaning it did not survive until June 2011 to be surrendered therefore Clause (7) of the guarantee had no effect. It was also argued that the plaintiff had denied the guarantors of executing a new lease by finding a new tenant.

Held by Laffoy J that the guarantors” contention that the lease was absolutely determined by the 13 th May 2013 fails as the first defendant continued in his possession of the premises paying a reduced rent which was sufficient for the lease to survive until at least January 2011 when there was no further rent payments.

The plaintiff had served a notice on the guarantors to require them to execute a new lease on the 4 th August 2011 on the same terms and conditions. It was from that point only that liability under Clause (7) was activated. However, from the 1 st May 2012, the plaintiff had been receiving a reduced rent from new tenants and would have to be factored into any judgment. There was also a difficulty in assessing the damages in lieu of specific performance in light of the fact that s. 132 of the Land and Conveyancing Law Reform Act 2009 would have applied if there had been specific performance meaning that the next review date would have 22nd February 2014. At that point, it was possible that the reviewed rent would have been greater than the rent under the lease so the plaintiff could show a loss. On the basis of a lack of evidence, it was held to be impossible to access the quantum of damages in lieu of rent therefore no award could be made.

However, it was held that there was a breach of contract from 27th March 2011 (the date the outstanding arrears commenced) and 4th August 2011 (when the guarantors were served notice obliging them to execute a lease). Rent for the one hundred and thirty days at €1,460.20 per day was awarded totalling €189,826.00, as well as the insurance premium paid by the plaintiff in respect of 2011 totalling €9,609.60

Judgment in the sum of €199,435.60. The remainder of the claim dismissed.

1

Judgment of Ms. Justice Laffoy delivered on 10th day of May, 2013.

Relief claimed in the proceedings
2

1. The relief claimed in the general endorsement of claim on the plenary summons in these proceedings, which issued on 9 th September, 2011, as against the second and third named defendants (the Guarantors) was an order by way of specific performance of the agreement contained in a guarantee (the Guarantee) in writing made between the Guarantors of the one part and the plaintiff of the other part. The Guarantee was endorsed on a lease dated 22 nd February, 1999 (the Lease) made between the plaintiff of the one part and the first named defendant (the Lessee) of the other part. The specific terms of the order sought would require the Guarantors to accept and execute a lease of the licensed premises situate at Prospect Hill, Galway, formerly known as "Robert Lee's" and currently known as Cuba (the Licensed Premises), which had been the subject of the Lease, for a term commencing on 3 rd June, 2011, or, alternatively, on 15 th January, 2011, and terminating on 21 st February, 2019 at a rent of €10,220.40 per week but otherwise on the same terms and conditions as were contained in the Lease. In the alternative, the plaintiff claimed damages in lieu of specific performance as against the Guarantors. There was an alternative claim for judgment for all sums due by all of the defendants to the plaintiff in respect of arrears of rent and insurance under the Lease and/or in respect of back rent and insurance under the terms of the lease which the Guarantors were required to accept.

3

2. Nothing had changed by the time the statement of claim was delivered on 23 rd September, 2011 and the relief sought in the statement of claim replicated the relief sought in the plenary summons.

4

3. However, things had changed by the time the matter came on for hearing on 28 th February, 2013. By order of the Court (Murphy J.) dated 26 th March, 2012 the plaintiff had obtained judgment against the Lessee in the sum of €107,443 in respect of unpaid rent and costs. Moreover, having regard to the factual circumstances which I will outline later, the plaintiff was no longer seeking specific performance against the Guarantors, but was seeking damages in lieu of specific performance.

5

4. Accordingly, the issue the Court has to determine is whether the Guarantors are liable for the damages claimed by the plaintiff.

Factual background
6

5. The Lease created a demise of the Licensed Premises for a term of twenty years from 21 st February, 1999. It reserved the yearly rent of IR£364,000. which was subject to review every five years in accordance with provisions which provided for review on an upwards only basis. Rent was payable weekly in advance. The provisions of the Lease which were invoked by the parties at the hearing were the following:

7

(a) Paragraph (34) of the Lessee's covenants, which was in the following terms:

"In the event of the Lessee being a Company and going into liquidation … or in the event of a receiver being appointed then and in that event the Lease will automatically terminate and the Lessor will be entitled to take over immediate possession of the property."

8

(b) The proviso for re-entry, which was the penultimate provision of the Lease, being paragraph (b) of an unnumbered proviso, and which provided as follows:

"If the rent hereby reserved or any part thereof shall be in arrear or remain unpaid for a period often days after same shall have become due or the Lessee shall fail or neglect to perform or observe the covenants and conditions and agreements on the part of the Lessee herein before contained or any of them then in every such event this Lease and the term hereby created shall cease and determine absolutely as if it [had] expired by effluxion of time and it shall and may be lawful for the Lessor or his Agents duly authorised to re-enter upon the demised premises or any part thereof and the same to have again re-possess and enjoy as if the agreement had never been made and further in such event or events the Lessee's claim to the demised premises shall be entirely at an end and the Lessee's Lease shall cease...."

9

(c) The final provision in the Lease, which was paragraph (c) of the unnumbered proviso, which was a proviso for re-entry if the Lessee being...

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