Myles Kirby v Express Bus Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Allen
• Judgment Date: 14 May 2021
• Neutral Citation: [2021] IEHC 334
• Docket Number: [2019 No. 415 COS]
• Court: High Court
• Date: 14 May 2021

In the Matter of Ethafil Limited (In Voluntary Liquidation)

And in the Matter of an Application Pursuant to Section 631 of the Companies Act 2014

Between

Myles Kirby

Applicant

and

Express Bus Limited

Respondent

[2021] IEHC 334

[2019 No. 415 COS]

THE HIGH COURT

Liquidation – Property – Rights and liabilities – Applicant seeking directions as to the rights and liabilities of the parties – Whether the respondent was in lawful occupation of the property

Facts: Ethafil Ltd (in voluntary liquidation) (the Company) was the registered owner of the property in Folio 51988F, County Dublin. The property was formerly the headquarters of Pierse Contracting Ltd (Pierse) which collapsed in 2010 and went into receivership and liquidation. By lease dated 15th May, 2012 Pierse, by its receiver, demised part of the property to the respondent, Express Bus Ltd (EBL), for a term of three years from that date at an annual rent of €35,000. On 19th February, 2015 EBL signed a contract to buy the entire property from Pierse for €1,005,990. That contract provided for the payment of a deposit of €100,559 and for completion in four weeks. The deposit was paid but EBL did not have the money to complete. In November, 2015 an investor was identified who had, or could find, the money to fund the completion of the purchase and on 11th November, 2015 an agreement was signed the commercial object of which was to see the purchase completed by the investor, who would then grant to EBL a new lease of that part of the property which it occupied (Lot 2), and options to purchase Lot 2 and the balance of the property (Lot 1). The formal lease and option agreements contemplated by the agreement of 11th November, 2015 were never put in place. EBL remained in possession of Lot 2. It claimed, variously, to be entitled to purchase Lot 2, alternatively to be entitled to a new lease of Lot 2. The Company claimed that it was entitled to neither. On 18th June, 2019 the Company went into liquidation and the applicant, Mr Kirby, was appointed liquidator. Mr Kirby applied to the High Court seeking the directions of the court as to the rights and liabilities of the parties in relation to the property. The questions posed by the liquidator for determination by the court were as follows: (1) whether EBL is in lawful occupation of the property in Folio 51988F (or any part thereof); (2) whether EBL holds a valid and subsisting option to purchase the property (or any part thereof) pursuant to the agreement of 11th November, 2015; (3) if the answer to question 2 is in the affirmative, whether EBL has validly exercised an option under the 2015 agreement; (4) if the answer to question 2 is in the affirmative, whether the liquidator is entitled to disclaim the 2015 agreement pursuant to s. 615 of the Companies Act 2014.

Held by Allen J that the effect of the agreement of 11th November, 2015 was that EBL was entitled to a five year lease of Lot 2 at a rent of €50,000 per annum payable by monthly instalments in advance, and on the terms set out in Schedule 1, and to an option to purchase Lot 2 for €190,000, with credit for the sum of €50,590 paid. He held that the agreement contemplated that additional documents would be prepared and executed but the substantive right and liabilities of the parties were not conditional upon that being done. He held that there was no express agreement as to the term commencement date but a matter of business efficacy it is to be implied that the term of the lease and of the option would run from the date on which the Company completed the purchase of the property. He held that EBL was entitled to an option to purchase Lot 2 within the first twelve months of the term of the lease, subject to the proviso that the option would lapse in the event of a failure to make three monthly payments in full and on time. He held that EBL did not pay the rent in full and on time and the option had lapsed at the time it was purportedly exercised. He held that EBL did not, on the expiration of the term of the lease of 15th May, 2012 on 14th May, 2015 hold over as a tenant from year to year and was not a tenant of the Company on those terms but rather for a five year term from 18th December, 2015, on the terms set out in Schedule 1 to the agreement of 11th November, 2015.

Allen J held that since his analysis and conclusion as to the nature of EBL’s occupation did not quite match the submissions of either party, he would hear counsel further as to the precise answer to the first of the liquidator’s questions. To facilitate that, and to deal with the costs of the motion, he listed the case for mention on 4th June. At the same time he would hear counsel as to the listing of EBL’s s. 678 application.

Decision on issues arising in liquidation.

JUDGMENT of Mr. Justice Allen delivered on the 14th day of May, 2021

Introduction

1 Ethafil Limited (In voluntary liquidation) (“ the Company”) is the registered owner of the property in Folio 51988F, County Dublin, which is known as Birmayne House, Mulhuddart, County Dublin. The property was formerly the headquarters of Pierse Contracting Limited (“ Pierse”) which collapsed in 2010 and went into receivership and liquidation.

2 By lease dated 15th May, 2012 Pierse, by its receiver, demised part of the property to Express Bus Limited (“ EBL”) for a term of three years from that date at an annual rent of €35,000.

3 On 19th February, 2015 EBL signed a contract to buy the entire property from Pierse for €1,005,990. That contract provided for the payment of a deposit of €100,559 and for completion in four weeks. The deposit was paid but EBL did not have the money to complete.

4 In November, 2015 an investor was identified who had, or could find, the money to fund the completion of the purchase and on 11th November, 2015 an agreement was signed the commercial object of which was to see the purchase completed by the investor, who would then grant to EBL a new lease of that part of the property which it occupied (“ Lot 2”), and options to purchase Lot 2 and the balance of the property (“ Lot 1”).

5 At the time of the contract between EBL and Pierse the Company was a wholly owned subsidiary of EBL but it was a shell company which was later used by the investor as the corporate vehicle by which the purchase was completed. In the years that followed there was a protracted exchange of correspondence, but the formal lease and option agreements contemplated by the agreement of 11th November, 2015 were never put in place. All the while EBL has remained in possession of Lot 2. It claims, variously, to be entitled to purchase Lot 2, alternatively to be entitled to a new lease of Lot 2. The Company claims that it is entitled to neither.

6 On 18th June, 2019 the Company went into liquidation and Mr. Myles Kirby was appointed liquidator. By this application Mr. Kirby seeks the directions of the court as to the rights and liabilities of the parties in relation to the property.

The facts

7 There was a protracted exchange of affidavits on the motion but to a considerable degree these were argumentative. In the end there was little or no dispute as to the objective facts, but it took some time for the full picture to emerge, partly because each of the parties was reacting to what the other had said and partly because for a long time the deponents on each side had had no direct involvement with the underlying business but were working from their files.

8 By lease made the 15th May, 2012 between Pierse, by its receiver, and EBL, Pierse demised that part of Birmayne House shown outlined in red on a map attached to EBL for a term of three years from 15th May, 2012 at a rent of €35,000 per annum, payable by equal quarterly instalments in advance. By a deed of renunciation of the same date EBL renounced any entitlement it might have under the provisions of the Landlord and Tenant Acts to a new tenancy.

9 By agreement in writing dated 19th February, 2015, in the Law Society of Ireland standard form but hollowed out by a number of special conditions, Pierse agreed to sell and EBL to purchase all of the lands comprised in Folio 51988F, County Dublin, subject to and with the benefit of the lease of 15th May, 2012, for €1,005,990. The contract provided for payment of a deposit of €100,599 and for completion in four weeks. Special condition 20 provided that the purchaser should not assign, novate, sub-sell or otherwise dispose of its interest in the property under the contract but that the purchaser might call for an assurance to a wholly owned subsidiary.

10 The deposit provided for by the contract of 19th February, 2015 was already in the hands of the vendor's solicitors, to whom EBL's solicitors had paid €10,000 on 2nd October, 2014, €40,599 on 13th February, 2015, and €50,000 on 16th February, 2015. The deposit monies had come as to €50,599 from EBL and as to €50,000 from the investor.

11 By agreement in writing dated 11th November, 2015 made between EBL, referred to as the Purchaser, the Company, referred to as the Company, Kathleen Martin, referred to as the Shareholder, and Jon Griffin, referred to as the Transferee, Mr. Griffin agreed to procure the advance to the Company of a loan in the amount of the balance of the consideration payable under the contract for the purchase of the property, and EBL and Mrs. Martin agreed to procure the transfer to Mr. Griffin of the entire issued share capital in the Company. By clause 2.1.6 it was provided that the Company and EBL would “ enter into the required property documents to give effect to the terms as set out at Schedule 1.”

12 The issues between the parties turn on the construction and effect of Schedule 1 and I will set it out in full:-

“ Schedule 1 – Terms of the Lease Agreement and Option Agreement

• 1. The Parties agree that at the Second Completion Date a:

  • (i) lease agreement; — FRI lease in the form of the Laffoy...