Tempany v Royal Liver Trustees Ltd, Re Farm Machinery Distributors Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Keane
• Judgment Date: 01 January 1984
• Neutral Citation: 1983 WJSC-HC 3614
• Court: High Court
• Date: 01 January 1984

1983 WJSC-HC 3614

THE HIGH COURT

No. 26Sp. Ct. 6/1983

TEMPANY v. ROYAL LIVER TRUSTEES LTD.

IN THE MATTER OF THE COMPANIES ACTS 1963– 1982;

AND IN THE MATTER OF S. 290 OF TEE COMPANIES ACT 1963;

AND IN THE MATTER OF FARM MACHINERY DISTRIBUTORS LTD. (IN VOLUNTARY LIQUIDATION)

BETWEEN:

MAURICE TEMPANY

Applicant

and

ROYAL LIVER TRUSTEES LTD. (THE TRUSTEE OP THE ROYAL LIVER FRIENDLY SOCIETY)

Respondent

Subject Headings:

WINDING UP: land

1 JUDGMENT of Mr. Justice Keane delivered the 19th day of May 1983

2 The facts of this matter are not in dispute. By an Indenture of Lease (which I shall call "the lease") made on the 30th April, 1976, between the respondent (whom I shall call "the lessors") of the first part, the above-named Farm Machinery Distributors Ltd. Under their then name of Massey Ferguson (Eire) Ltd. (whom I shall call "the lessees") of the second part and Massey Ferguson Holdings Ltd. (whom I shall call "the surety") of the third part, the lessors granted a lease for 35 years from 30th April)1976,to the lessees of a factory premises (which I shall call "the premises") which is situate on the North side of the Naas Road in Drimnagh, Dublin. Under the terms of the lease, the rent of the premises was £62,000 per annum from 30th April, 1976, for a period of 5 years thereafter. Since 30th April, 1981, the rent of the premises has been determined in accordance with the relevant provisions in the lease at £160,000 per annum.

3 The lease incorporated a guarantee by the surety in the following terms:-

"The (surety) in consideration of the lease hereinbefore contained being made by the (lessors) agrees with and guarantees to the (lessors) that at all times so long as the term hereby granted is vested in (the lessees) (the lessees) will pay the rent hereby reserved and all other sums and payments herein covenanted to be paid by the (lessees) at the respective times and in manner hereinbefore appointed for payment thereof and will also duly perform observe and keep the several stipulations "herein on the (lessees) part contained and that the (surety) will pay and make good to the (lessors) all losses costs and expenses sustained by the (lessors) through the default of the (lessees) in respect of any of the beforementioned matters PROVIDED ALWAYSthat any neglect or forbearance of the lessors in endeavouring to obtain payment of the said rent and payments as and when the same become due or its delay in taking any steps to enforce performance or observance of the several stipulations herein on (the lessees)part contained and any time which may be given by the (lessors) to the (lessees) shall not release or in any way lessen or effect (sic) the liability of the (surety) under this guarantee".

The lessees are a wholly owned subsidiary of the T.M.G. Group Limited. The latter company, upon acquiring the issued share capital of the lessees, entered into an agreement with the surety the terms of which are set out in a letter dated the 26th March, 1979 and include the following:

"Forthwith upon acceptance of the offer by (Massey-Ferguson-Perkins Ltd.), the (T.M.G. Group Limited) shall use its best endeavours to procure with effect from completion the release of (the surety) from its guarantee and all other obligations on its part contained in (the lease) and pending such release (the T.M.G. Group Ltd.) will indemnify and hold (the surety) harmless and will keep (the surety) indemnified and held harmless from and against all losses, costs, claims, demands, damages and expenses which (the surety) may sustain or incur in consequence of its said obligations in respect of any matter arising after completion."

4 On the 4th January 1983, the lessees passed an ordinary resolution resolving that it should be wound up voluntarily and appointing the applicant (whom I shall call "the liquidator") as liquidator.

5 On the 18th January, 1983, the liquidator was advised by Messrs Lisney & Son, auctioneers, that there was no value in the interest of the lessees under the lease and that to attract an assignee in present market conditions it could well be necessary to provide for a "reverse premium", i.e. a payment by the lessees to an assignee to take the property off the hands of the lessees. It was accepted at the hearing before me that this view was correct.

6 The lease contains a repairing covenant by the lessees. By letter dated the 9th August, 1982, the lessors gave notice to the lessees of alleged breaches by the lessees of the repairing covenant and enclosed a schedule of dilapidations. By letter dated the 27th January, 1983, the lessors gave the liquidator notice of further repairs, which were alleged to be required and a further schedule of dilapidations was enclosed. It was not disputed at the hearing before me that such repairs were required under the terms of the lease; and their total cost was estimated on behalf of the lessors, in the sum of £683,472.00.

7 In a report dated the 28th February, 1983, Messrs Druker, Fanning and Partners, auctioneers and valuers, advised the lessors that it would be prudent and necessary to allow for a period of two years to effect a suitable alternative letting of the premises which would provide an equivalent covenant and rental income to the lessors. The total amount of the loss which it was estimated the lessors would suffer if the premises were re-let in this manner, including the cost of the necessary repairs, payment of rates, etc., was stated to be £1,250,000. While these figures were not accepted as being necessarily correct in every respect, it was accepted by all the parties that they broadly reflected the true state of affairs.

8 A statement of assets and liabilities of the lessees as of the 23rd December 1982 shows that upon payment of the preferential creditors there will remain the sum of £36,628 only available for distribution among the remaining creditors whose claims are stated to amount to £975,274. This latter figure does not include any part of the stuns mentioned in the preceding paragraph as representing the damage likely to be sustained by the lessors. It is clear, and again was accepted by all the parties at the hearing before me, that in these circumstances, upon the completion of the liquidation there will be little or no money available for distribution among the ordinary creditors.

9 The premises were occupied on an informal basis up to the date of the appointment of the liquidator by the T.M.G. Group Ltd. and two of its subsidiaries. It would appear that one of the subsidiaries, which is in receivership, had been leaking an annual payment of £80,000 to the lessees in respect of its occupation, but that no such payment has been made since 1st October 1982 and no payment has been received by any other company which has occupied or used the premises. There was no suggestion that the liquidator at any stage went into occupation of the premises.

10 On the 4th February, 1983, the solicitors for the liquidator wrote to the solicitors for the lessors requesting the lessors to accept a surrender of the lessee's interest in the lease and giving notice that, in the event of the lessors declining to do so, the liquidator would apply to the Court under the provisions of the Companies Act, 1963, for an order giving him liberty to disclaim the lessee's interest in the lease. In their reply dated the 7th February, 1983, the solicitors for the lessors said that their clients were not prepared to accept the surrender of the lessee's interest and would oppose any application for an order giving the liquidator liberty to disclaim. On the 24th January, 1983, the liquidator had commenced the proceedings now before me by the issue of a special summons in which he claims an order pursuant to section 290 (1) of the Companies Act, 1963, giving leave to the liquidator to disclaim the lease on the grounds that the leasehold interest is bordensome, contains onerous covenants or is unsaleable or not readily saleable by reason of the payment of the rent now reserved under the lease. At the hearing of the special summons before me, submissions v/ere made on behalf of the liquidator, the lessors, the surety and the T.M.G. Group Ltd.

11 Section 290(1) of the Companies Act, 1963, provides that:-

"Subject to sub-sections (2) and (5), where any part of the property of a company which is being wound up consists of land of any tenure burdened with onerous covenants, of shares or stock in companies, of unprofitable contracts, or of any other property which is unsaleable or not readily saleable by reason of its binding the possessor thereof to the performance of any onerous acts or to the payment of any sum of money, the liquidator of the company, notwithstanding that he has endeavoured to sell or has taken possession of the property or exercised any act of ownership in relation thereto, may, with the leave of the Court and subject to the provisions of this section, by writing signed by him, at any time within twelve months after the commencement of the winding-up or such extended period as may be allowed "by the court, disclaim the property".

There are a number of other provisions in the section, of which two require particular mention. Sub-section (3) provides that:-

"The disclaimer shall operate to determine, as from the date of disclaimer, the rights, interests, and liabilities of the company, and the property of the company, in or in respect of the property disclaimed, but shall not, except so far as is necessary for the purpose of releasing the company and the property of the company from liability, affect the rights or liabilities of any other person."

12 Sub-section (9) provides that:-

"Any person damaged by the operation of a disclaimer under this section shall be deemed to be a creditor of the company to the amount of the damages, and may accordingly prove the amount as a debt in the winding-up."

13 ...