Re Bestseller Retail Ireland Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Brian J. McGovern
• Judgment Date: 23 April 2010
• Neutral Citation: [2010] IEHC 155
• Court: High Court
• Date: 23 April 2010

[2010] IEHC 155

THE HIGH COURT

[No. 117 COS/2010]

Bestseller Retail Ireland Ltd, In re

IN THE MATTER OF BESTSELLER RETAIL IRELAND LIMITED

AND

IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2009

COMPANIES (AMDT) ACT 1990 S20(1)

COMPANIES (AMDT) ACT 1990 S20(3)

LINEN SUPPLY OF IRELAND LTD (FORMERLY CWS-BOCO IRL LTD), IN RE UNREP SUPREME 10.12.2009 (EX TEMPORE)

COMPANIES (AMDT) ACT 1990 S20

TRAFFIC GROUP LTD, IN RE 2008 3 IR 253 2008 2 ILRM 1 2007/58/12501 2007 IEHC 445

VANTIVE HOLDINGS & ORS, IN RE UNREP SUPREME 14.10.2009 2009 IESC 69

LINEN SUPPLY OF IRELAND LIMITED (FORMERLY KNOWN AS CWS-BOCO IRELAND LIMITED) UNREP MCGOVERN 3.2.2010 2010 IEHC 28

COMPANY LAW

Examinership

Repudiation of leases - Insolvency - Interim examiner - Wholly owned subsidiary - Independent accountant report - Closure of underperforming stores essential to survival - Objection of landlords - Whether company failed to make full disclosure - Effect of repudiation - Property rights - No application to repudiate where parent company guarantor - Whether selection criterion for repudiation based on commercial considerations - Interim application - Compromise possible if application refused - Whether dominant motive for exclusion of leases for which repudiation not sought protection of interests of holding company - Re Linen Supply of Ireland Ltd (Unrep, SC, 10/12/2009) considered - Re Linen Supply of Ireland Ltd [2010] IEHC 28 (Unrep, McGovern J, 03/02/2010) distinguished - Re Traffic Group Ltd [2007] IEHC 445 [2008] 3 IR 253 and Re Vantive Holdings Ltd (No 2) [2009] IESC 69 (Unrep, SC, 14/10/2009) followed - Companies (Amendment) Act 1990 (No 27), ss 20(1) and 20(3) - Relief refused (2010/117COS - McGovern J - 23/04/2010) [2010] IEHC 155

In re Bestseller Retail Ireland Ltd

Facts the applicant applied for orders pursuant to section 20 (2) and 20 (3) of the Companies (Amendment) Act 1990 repudiating a number of leases held by it. An examiner had previously been appointed following the insolvency of the company. He was of the opinion that, to ensure the survival of the company, several of its stores would have to be closed, hence the application. The landlords in question resisted the application on the basis that that the only leases in respect of which repudiation was not sought were those where the parent company had given guarantees and that amounted to invidious discrimination in the way they would be treated vis--vis those tenancies with the benefit of the guarantees.

Held by Mr. Justice McGovern in refusing the relief sought that if the Company were allowed repudiate the leases, the landlords concerned would suffer significant loss, which being a loss affecting a property right of a landlord, was something which could only be done in exceptional circumstances and where permitted in law. That a material consideration in exercising discretion as to whether or not to permit repudiation of leases held by the company was that the parent company of the applicant was a guarantor for the rent due under a number of the leases held by the company and no application had been made to repudiate the leases on foot of which there were guarantees. As the only leases in respect of which repudiation was not sought were those where the parent company had given guarantees. That evidence suggested that the dominant motive for excluding those properties from the ambit of the motion was to protect the interests of the holding company which was the shareholder in the company which, in turn, suggested that it was a process designed to help shareholders whose investment had proved to be unsuccessful which was something outside the scope and purpose of the Act of 1990.

Reporter: P.C.

1 JUDGMENT of Mr. Justice Brian J. McGovern delivered on the 23rd day of April, 2010

2 1. This is an application by Bestseller Retail Ltd. ("the Company") for orders, pursuant to s. 20(1) and s. 20(3) of the Companies (Amendment) Act 1990, in respect of a number of leases.

3 2. The Company has been trading in Ireland since 1991, and is a wholly owned subsidiary of Bestseller A/S, a company incorporated in Denmark. The Bestseller group of companies is a family owned company operating a clothing business and commenced trading in Denmark in 1975. The Group has operated in a number of countries and its typical operating model is the establishment of two subsidiaries, one operating as a distribution company, and one operating as a retail company. The distribution subsidiary supplies both the retail subsidiary and other third party retail entities in the country. In Ireland, it operates under four brands, namely: (i) Name It (formerly Exit), (ii) Vero Moda, (iii) Jack & Jones and (iv) Only. The Company operates from thirty-six stores in the Republic and under thirty leases. The Company is insolvent. On 26 ^th February, 2010, Mr. Declan McDonald was appointed as Interim Examiner and his appointment was confirmed on 9 ^th March, 2010.

4 3. On the application to appoint an examiner, an independent accountant's report was furnished which recommended that fourteen stores should be shut down. The independent accountant's report states, inter alia, in para. 5.2, that, in his opinion, it is essential to the survival of the Company that the fourteen underperforming stores be closed and that such other stores as may be identified as causing a deficit on the financial position of the Company will also have to be closed. Subsequently, the Examiner added a further three stores as being unprofitable and a financial drain on the Company. These include the premises in Clanbrassil Street in Dundalk.

5 4. The Company brings this application to repudiate a number of leases. While agreement has been reached with some landlords, there are others who are objecting to the repudiation of the leases. Written submissions have been received on behalf of Mr. Eamon Duignan and Mr. Cathal McCarthy, the owners of premises in Navan, County Meath, and also on behalf of the Seamus Duffy Retirement Scheme in respect of premises at 84, Clanbrassil Street, Dundalk, County Louth. Objections were also heard from the landlords of premises at 49 O'Connell Street, Sligo, and Unit 10, The Mall, in Tralee. These parties adopted the submissions made by the landlords of the Navan and Dundalk properties. Among the complaints made by the...