Arrow left dark
Newsletter icon SUBSCRIBE

High Court: Dunnes Stores failed to establish strong case in application for injunctions against receiver

Clock icon Reading time: 5 minutes

In a dispute over a “set-off arrangement” to which Dunnes Stores was a party, the High Court has held that Dunnes has failed to establish a “strong case” in order to be granted injunctions pending the substantive proceedings.

Image

About this case:

The lease

In April 2000 Dunnes Stores took the ‘Anchor Lease’ in Ashleaf Shopping Centre in Crumlin from Primeview Company. The Ashleaf car park (minus 50 spaces) was demised to a company within the Dunnes group – Almonte – for 925 years.

The set-off arrangement

In April 2000, Almonte then demised the Car Park to Messrs John and Frank Smith for 20 years (the Car Park Occupational Lease).

For 13 years thereafter, Dunnes was to pay €100k p.a. to John and Frank Smith in respect of the Car Park.

In practice, that €100k p.a. was set off against the rent owing under the Car Park Occupational Lease.

Transfer of interests

In 2006, the interests of John and Frank Smith were transferred to Mr Gary Smith – notably Almonte consented to the assignment of the Car Park Occupational Lease to Gary Smith.

In Febraury 2013, AIB Banks plc appointed a receiver over the interest of Mr Gary Smith in the Car Park. Mr Gary Smith was declared bankrupt by the Central London County Court in December 2013.

The Car Park Occupational Lease was disclaimed by Mr Gary Smith’s English bankruptcy trustee on 24th April, 2015.

Dispute

Sometime after the appointment of the receiver, a dispute arose between the parties to these proceedings concerning the set-off arrangement.

The receiver contended that the necessary mutuality for such a set-off arrangement did not exist, and offered the additional rationale that Mr Gary Smith’s trustee in bankruptcy, in April 2015, disclaimed Mr Smith’s obligations.

Dunnes maintained, inter alia, that the necessary mutuality does exist and that it has in any event an express contractual right of set-off. It contended that the receiver was in occupation of the Car Park under the Car Park Occupational Lease and that there has been no valid disclaimer of that lease.

Mr Justice Max Barrett said that the ‘long and the short’ of the foregoing has been that

  1. since the appointment of the receiver, no monies have been paid by Dunnes Stores to the receiver in respect of service charges on the anchor unit,

  2. no monies have been paid by the receiver to Dunnes Stores, and

  3. because the receiver has received no monies from Dunnes, he had to delve into his existing resources to meet circa. €2m of expenses incurred in the provision of extended-hour Services and access to Common Areas since his appointment.

    4. Pending the determination of substantive proceedings, Dunnes sought an interim and/or interlocutory quia timet injunction prohibiting the receiver from altering; and an interim and/or interlocutory injunction prohibiting the receiver from altering:

    1. the hours during which the services provided pursuant to cl. 6 of, and the Seventh Schedule to, the Anchor Lease are provided

    2. the hours of access of Dunnes Stores to the Service and Common Areas, including the service yard at Ashleaf, for the purposes of making deliveries to or collections from or otherwise servicing the Demised Premises (as defined in the Anchor Lease)

      3. Strong Case

      Justice Barrett gave five reasons why he considered Dunnes to have ‘failed entirely’ to establish that it had a strong case that would likely succeed at trial:

      1. The Car Park Occupational Lease was disclaimed by Mr Gary Smith’s English bankruptcy trustee in April 2015. The court has affidavit evidence before it that “under the English Insolvency Rules, a disclaimer is presumed valid and effective unless a party can prove the contrary”. Dunnes Stores never challenged the validity of that disclaimer in England and the Irish courts have no jurisdiction to declare invalid an act in an English bankruptcy.

      2. Regarding the set-off clause in the Licence for Assignment, Justice Barrett stated that in either of two possible scenarios identified by the court, Dunnes was not possessed of the requisite “strong case”.

      3. There was not “a stateable case for a general or equitable right of set-off because there is no mutuality between debts allegedly owed by Mr Gary Smith to Almonte, and Service Charges payable by Dunnes Stores to the receiver”. It is a fundamental principle that for set-off to be exercisable, the relevant debts must be owed between the same parties in the same right, even in cases of equitable set-off. Dunnes was also seeking a right of set-off in respect of a liability (rent) that arose after the receiver was appointed; however, where a debt owed by A to B becomes due after a receiver is appointed to A, A’s secured creditor takes the assignment of any debt owed by B to A free from B’s right to set-off when it comes to debts that did not yet exist at the time of assignment.

      4. Regarding the receiver as a trespasser, the court identified two scenarios – both of which Dunnes was not possessed of the requisite “strong case”.

      5. Even if it could be inferred that the receiver has agreed to enter into a new tenancy over the Car Park, indeed even if such a tenancy exists, any rent payable would not be capable of being set-off against Service Charges. This again is because the contractual right of set-off in cl.11 of the Licence for Assignment only applies to “any rent or sum of money” falling due under “the Lease”, i.e. the Car Park Occupational Lease, not any new arrangement. It follows that Dunnes Stores is not possessed in this regard of the requisite “strong case”.

        6. As Dunnes failed entirely to show that it has the requisite “strong case” for the mandatory injunction it sought.

        Refusing the application for injunctive relief, Justice Barrett said it was not necessary for the court to proceed to consider the adequacy of damages and the balance of convenience.

        • by Seosamh Gráinséir for Irish Legal News

          • Share icon
          Share this article: