Malachy McDaniel Stone v Red Vallet Ltd, Austrent Ltd and Ballinacarrig Park Club Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Hedigan
• Judgment Date: 29 July 2011
• Neutral Citation: [2011] IEHC 322
• Docket Number: [No. 5702 P/2010]
• Court: High Court
• Date: 29 July 2011

[2011] IEHC 322

THE HIGH COURT

[No. 5702 P/2010]

[No. 11697 P/2010]

Stone v Red Valley Ltd & Ors

BETWEEN:

MALACHY Mc DANIEL STONE

PLAINTIFF

V.

RED VALLEY LIMITED

DEFENDANT

AND BETWEEN:

MALACHY Mc DANIEL STONE

PLAINTIFF

V.

RED VALLEY LIMITED, AUSTRENT LIMITED AND BALLINACARRIG PARK CLUB LIMITED

DEFENDANTS

COURTS ACT 1981

PENNELL v PAYNE & ANOR 1995 QB 192 1995 2 WLR 261 1995 2 AER 592

LANDLORD & TENANT (AMDT) ACT 1980 S78

CARR v PHELAN 1976-7 ILRM 149

LANDLORD & TENANT (GROUND RENTS) ACT 1967

INVESTORS COMPENSATION SCHEME LTD v WEST BROMWICH BUILDING SOCIETY (NO 1) 1998 1 WLR 896 1998 1 AER 98 1998 1 BCLC 493 1997 CLC 1243

PW & CO v MILTON GATE INVESTMENTS LTD 2004 CH 142 2004 2 WLR 443 2004 L & TR 8

HALSBURYS LAWS OF ENGLAND 4ED VOL 16 PARA 1018

LAND LAW

Landlord and tenant

Lease - Termination of lease - Forfeiture - Application for possession - Breach of covenant - Non-payment of rent - Terms of lease - Sublease - Whether sublease automatically terminated by virtue of forfeiture of head lease - Whether sublease survived - Whether third defendant entitled to issue subleases - Pennell v Payne [1995] 2 All ER 952; Carr v Phelan [1967] ILRM 149; ICS v West Bromich BS [1998] 1 WLR 896 and PW & Co v Milton Gate Investments [2004] Ch 14 considered - Landlord and Tenant (Amendment) Act 1980 (No 10), s 78 - Landlord and Tenant (Ground Rents) Act 1967 (No 3) - Conveyancing Act 1882 (45 & 46 Vic, c 39), s 4 - Relief refused (2010/5702P & 11697P - Hedigan J - 29/7/2011) [2011] IEHC 322

Stone v Red Valley Ltd

Facts The plaintiff was the owner of lands upon which a caravan park was situated. The lands had been demised by a head lease for the term of 35 years to the first-named defendant and ultimately the third-named defendant (Ballinacarrig) held the occupational lease. The first named defendant also demised its reversionary interest in the park to the third-named defendant for a term of 35 years. A dispute arose when the first named defendant failed to pay the rent increase and the bank guarantee in respect of same expired. The plaintiff issued a forfeiture notice and issued proceedings seeking possession of the lands, damages and mesne rates. The first and second named defendants did not contest the plaintiff's entitlement to re-enter the demised lands but the third-named defendant (Ballinacarrig) asserted that the lease under which it held the property continued to subsist. The third named defendant then attempted to grant subleases to each of the mobile homes owners. The plaintiff asserted that no sub leases could be created as the head lease was forfeit and obtained an injunction restraining the third named defendant from sub-leasing its interest in the lands. The third named defendant did not dispute the forfeiture of the lease but claimed that by virtue of a special condition in its lease, rights were conferred on it and as a result of this provision an estoppel arose. The plaintiff submitted that in the event that the Ballinacarrig lease had not automatically terminated by, it was forfeit due to non-payment of rent. The third named defendant did not deny non-payment of the rent but asserted that the non-payment arose because the plaintiff wrongfully obtained an injunction restraining the third named defendant from sub-leasing the lands making it impossible for the third defendant to seek to collect monies from the users of the park with which to pay the rent to the plaintiff.

Held by Hedigan J in finding of favour of the third-named defendant. The special condition in the Ballinacarrig lease meant that section 78 of the Landlord and Tenant Act, 1980 was brought into play for the benefit of the lease. The Ballinacarrig lease survived the forfeiture of the Red Valley lease and entitled Ballinacarrig to issue subleases. Thus the plaintiff was estopped by deed from denying the right and title of the third defendant to issue subleases. The plaintiff had wrongfully obtained the injunction restraining the third defendant from issuing subleases. It was clear from the evidence that for the present and for the foreseeable future, bank guarantees of rent payment were unavailable. The condition has thus become impossible and were the plaintiff to seek to forfeit the lease on this basis, he would clearly fail as the third defendant would be entitled to claim relief from such a condition. The plaintiff therefore, was not entitled to an order for possession nor to damages as claimed. The injunction granted herein was wrongly obtained and it would be necessary to have an inquiry as to damage incurred thereby.

Reporter: R.F.

Mr. Justice Hedigan

1 The plaintiff resides at Borleagh Manor, Inch, Gorey, Co Wexford. The first named defendant Red Valley Limited is a limited liability company with its registered office situate at Ballinacarrig Park, Brittas Bay, Co Wicklow. The second named defendant Austrent Limited is a limited liability company with its registered office situate at 29 Earlsfort Terrace, Dublin 2. The third named defendant Ballincarrig Park Club Limited is a limited liability company with its registered office situate at Ballinacarrig Park, Brittas Bay, Co Wicklow.

2. In this action the plaintiff seeks:-

2 (a) An order for possession of all that and those the lands comprised in Folio 6578F of the Register County Wicklow,

(b) Damages for breach of covenant,

(c) Mesne rates continuing to the date of possession,

3 (d) Interest pursuant to the Courts Act1981,

(e) Further and other order,

4 (f) Costs.

5 2 3.1 The plaintiff is the owner of lands at Ballinacarrig, Brittas Bay, Co Wicklow. The plaintiff operated the said lands as a caravan and mobile home park from the 1970's until July 2000. The residents of Ballinacarrig park each held licences from the plaintiff. The residents were eager to establish a more secure system of tenure and approached the plaintiff with a proposal to lease the entire park. In July 2000, the plaintiff agreed to allow the residents to have long leases on their holiday homes instead of renewable licences. The residents established three companies Red Valley Limited, Austrent Limited and Ballinacarrig Park Club Limited for the purpose of leasing the park from the plaintiff.

6 3 3.2 On the 1^st July, 2000, the plaintiff leased the caravan park to the first named defendant. This lease which is hereinafter referred to as "the head lease" was for a term of 35 years commencing on the 1^st January, 2000. By sub-lease dated the 1^st July 2000, the first-named defendant demised the park to the second-named defendant for a term of 10 years and the second-named defendant in turn demised the park to the third named defendant for an initial term of 6 years ("the occupational lease"). The term of this lease was extended by a further 4 years on the 26^th March, 2007. By a further sub-lease dated 1^st July, 2000, hereinafter referred to as "the Ballinacarrig lease", the first named defendant demised its reversionary interest in the park to the third-named defendant for a term of 35 years. The purpose of the various leases was to secure a VAT advantage. On foot of their increased security of tenure mobile home owners invested significantly in their mobile homes and improvements were also made to the park.

7 4 3.3 Under the head lease the tenant covenanted to pay the rents reserved and also to provide a bank guarantee for the payment of the rent during the currency of the lease. A dispute arose between the plaintiff and the first named defendant in and around the end of 2009. The first named defendant failed to pay an increase in the rent due under the terms of the head lease. Furthermore on the 31^st December, 2009, the bank guarantee procured by the first-named defendant expired. The first named defendant contacted a number of banks but was unable to obtain a new guarantee.

8 5 3.4 On the 29^th March, 2010, the plaintiff served a forfeiture notice on the first-named defendant calling on it to remedy the alleged breaches of covenants in the head lease within 28 days of the date of service. On the 26^th April, 2010, the period allowed by the forfeiture notice expired. The plaintiff issued forfeiture proceedings seeking an order for possession. The plenary summons and statement of claim were forwarded to the defendants solicitors Lavelle Coleman on the 15^th June, 2010. The first and second named defendants did not contest the plaintiff's entitlement to re-enter the demised lands. However the third named defendant asserted that the lease under which it held the property namely the Ballinacarrig lease continued to subsist.

9 6 3.6 Around 176 mobile homes are situated in the park and each of the home owners were in occupation of their site pursuant to a licence granted by the third-named defendant. At an AGM on the 2^nd August, 2010, the third named defendant resolved to grant subleases to each of the mobile homes owners. On the 11^th November, 2010, the plaintiff's solicitors Ivor Fitzpatrick and Company wrote to the defendant's solicitors Lavelle Coleman objecting to this course of action on the basis that sub leases could not be created as the head lease was forfeit.

10 7 3.7 On the 8^th December, 2010, a letter was written by Noel Smyth on behalf of the third named defendant to each of the mobile home owners recommending that the mobile home owners cancel all standing orders in favour of the plaintiff. In that letter the third named defendant also indicated that it intended to issue and grant sub leases for a 24 year term at a fixed rent, without any bank guarantee and with annual break options in favour of the sub-lessees/mobile home owners. On the 16^th December, 2010 the plaintiff's solicitors wrote to the defendants solicitors seeking an undertaking from the first and third named defendants to "desist from issuing such sub-leases until the final...