Treacy v Lee James Menswear Ltd v Anor

• Jurisdiction: Ireland
• Judge: Mr. Justice Charles Meenan
• Judgment Date: 02 November 2022
• Neutral Citation: [2022] IEHC 600
• Court: High Court
• Docket Number: [2020 333 S]

Between

Kenneth Treacy

Plaintiff

and

Lee James Menswear Limited and James O'Regan

Defendants

[2022] IEHC 600

[2020 333 S]

THE HIGH COURT

Summary judgment – Rent arrears – Frustration of contract – Plaintiff seeking summary judgment for rent arrears and unpaid insurance premiums – Whether the first defendant was relieved its obligation to pay rent and other amounts under the lease

Facts: The plaintiff, Mr Treacy, claimed that the first defendant, Lee James Menswear Ltd, had failed, contrary to the terms of a lease, to pay rent and further failed to pay insurance premiums that had become due. Though a part payment was made by the first defendant the plaintiff stated that as of 1 December 2020 the amount of €143,101.42 was due and owing by the defendant. This amount was specified in an invoice dated 1 December 2020 which set out the sum of €1,000 as being monies due for insurance and the sum of €185,416.70 in rent arrears for the period March to December 2020. Allowing for the part payment this left a balance due of €143,101.42. As of 1 June 2021, this amount had increased to €257,224.09. This amount was made up of insurance due of €3,872.65 and rent arrears for the period 1 March 2020 to 30 June 2021 of €296,666.72. Allowing for the part payment this left a sum of €257,224.09 claimed by the plaintiff. The plaintiff applied to the High Court seeking summary judgment for rent arrears and unpaid insurance premiums. The defendants submitted that by reason of the regulations to deal with the Covid-19 pandemic they were prevented from using the premises as a retail outlet. It was submitted that this amounted to frustration of contract, thereby relieving the first defendant of its obligation to pay rent and other amounts under the said lease.

Held by Meenan J that the authorities were overwhelmingly against the defence being put forward by the defendants: Ringsend Property Ltd v Donatex Ltd and Bernard McNamara [2009] IEHC 56, Footlocker Retail Ireland Ltd v Percy Nominees Ltd [2021] IEHC 749 and Oysters Shuckers Ltd T/A Klaw v Architecture Manufacture Support (EU) Ltd and Anor [2020] IEHC 527. Though it may be argued that the doctrine of frustration is an evolving one, Meenan J held that the contention by the first defendant that it was discharged of its obligation to pay rent for so long as the Covid-19 regulations were in force had no basis in law. Meenan J held that whilst Covid-19 regulations were in force the first defendant continued to remain and enjoy rights afforded by law to a tenant albeit the subject to temporary restrictions. Meenan J held that clauses 4.14 and 4.15 of the lease did not alter this and could not be relied upon by the defendants. Meenan J was satisfied that the defence raised by the defendants could be determined within the confines of an application for summary judgment.

Meenan J held that the plaintiff was entitled to recover the sums sought from the first defendant and also from the second defendant, Mr O’Regan J, as guarantor. Meenan J therefore granted judgment in favour of the plaintiff and would hear the parties on the precise amount of the judgment. As for costs Meenan J’s provisional view was that as the plaintiff had been entirely successful he was entitled to the costs of the proceedings to include reserve costs.

Judgment granted in favour of the plaintiff.

JUDGMENT of Mr. Justice Charles Meenan delivered on the 2 ^nd day of November, 2022

Background

1 . The plaintiff is a landlord and owner of 45 Oliver Plunkett Street, Cork and the ground floor of 9 Marlboro Street, Cork (together “the premises”).

2 . The first named defendant is a limited liability company having its registered office at 43 Oliver Plunkett Street, Cork. The second named defendant is a businessman and is director and shareholder of the first named defendant.

3 . By an indenture of lease in writing dated 14 June 2007 the plaintiff leased the premises to the first named defendant at a yearly rent of €222,500. By a further agreement of the same date the second named defendant agreed to guarantee the performance of the said lease by the first named defendant, in particular, payment of rent and other sums payable under the lease. The second named defendant also agreed that on the default of the first named defendant that the plaintiff could proceed against him as if the second named defendant was named as the payer under the said lease.

4 . The plaintiff's claim against the first named defendant is that it has failed, contrary to the terms of the lease, to pay rent and further failed to pay insurance premiums that had become due. Though a part payment was made by the first named defendant the plaintiff states that as of 1 December 2020 the amount of €143,101.42 was due and owing by the defendant. This amount was specified in an invoice dated 1 December 2020 which sets out the sum of €1,000 as being monies due for insurance and the sum of €185,416.70 in rent arrears for the period March to December 2020. Allowing for the part payment this leaves a balance due of 143,101.42. As of 1 June 2021, this amount had increased to €257,224.09. This amount was made up of insurance due of €3,872.65 and rent arrears for the period 1 March 2020 to 30 June 2021 of €296,666.72. Allowing for the part payment this left a sum of €257,224.09 claimed by the plaintiff.

5 . The plaintiff seeks summary judgment for rent arrears and unpaid insurance premia.

Application for summary judgment

6 . The application for summary judgment is grounded on an affidavit of the plaintiff. This affidavit exhibits the indenture of lease dated 14 June 2007 together with the correspondence with the defendants. In response there was an affidavit sworn by the second named defendant on behalf of both defendants. The second named defendant criticises the level of rent under the said lease stating:

“I say and believe that the first named defendant and I would never have entered into the agreement if we had had the slightest inkling that the economy was about to collapse ..”

The affidavit details the various attempts made to seek a reduction in rent which was acceded to for a period of time. The affidavit then sets out the defence of the defendants.

7 . The starting point for the defence is the various restrictions which commenced in March 2020 brought in by the Government to prevent the spread of the Covid-19 virus. The effect of these restrictions was that the first named defendant was obliged to close the demised premises for business for the period between March 2020 and May 2021. Arising from these closures the defendants rely on the following provisions contained in the said lease:

“Clause 4.14.1.5:

Not to engage in any activity in or on the demised premises which may result in:

The landlord incurring liability or expense under any statutory provision”.

and Clause 4.15.5 “not to use the demised premises —- for any illegal —- purpose —-”

8 . The defendants submit that by reason of the regulations to deal with the Covid-19 pandemic they were prevented from using the premises as a retail outlet. It is submitted that this amounted to frustration of contract, thereby relieving the first named defendant of its obligation...