The High Court refused O’Brien’s Irish Sandwich Bars Limited’s applications to repudiate more than 40 leases, ruling that the proposed wholesale repudiations did not come within section 20(1) of the Companies (Amendment) Act 1990. The court also said it could not fairly determine the affected landlords’ losses within the time available.
Mr Justice Ryan delivered the written judgment on 16 October 2009, after refusing the applications on 30 September. The company had made more than 60 motions seeking approval to repudiate leases where it had not reached agreement with landlords. Negotiations during the hearing resolved some cases, leaving a little over 40 for decision.
The company was in examinership and argued that an investment agreement with AIL was essential to its survival. It said the proposed investment depended on the company leaving its leases so that it could operate solely as a franchise business. The company told the court that failure to secure the arrangement would lead to liquidation.
The applications sought approval to repudiate each lease, orders vesting the lease terms in the landlords, and determinations of the loss or damage caused by repudiation. The company relied on a report by its expert surveyor and valuer to assess landlords’ losses. Landlords and franchisees objected, raising concerns about the legal consequences, the effect on their arrangements and the short time they had to prepare. Some landlords said their losses could exceed the report’s estimates.
The judge did not decide definitively how repudiation would affect the leases, subleases or the parties’ rights. He described those questions as complex and said the available submissions were limited. He also did not determine the individual losses claimed by landlords.
On the statutory issue, the judge held that section 20(1) did not permit repudiation of entire leases containing payment obligations as well as other performance obligations. The provision, he said, concerned residual performance obligations other than payment. He added that even if the section permitted repudiation, he would not approve the wholesale applications given the uncertainty, the differing circumstances and the short notice to respondents.
Finally, the court said it could not determine losses in more than 40 cases without an evidentially tested assessment and fair procedures. It therefore refused all the applications. The judgment did not decide the parties’ ultimate rights under individual leases or subleases.