The High Court refused an application by Citi Hedge Fund Services (Ireland) Limited and Citibank Europe plc over break options in two leases held from John Sisk & Son Ltd. The court held that the leases transferred to Citibank Europe under a 2011 scheme, but that a break option expressly personal to Citi Hedge could not be exercised by its successor.
The application, brought by notice of motion in January 2013, asked the court to clarify the effect of its December 2011 order. The companies sought a direction that the order transferred to Citibank Europe the benefit of break options exercisable in 2013 and 2018. Alternatively, they asked the court to direct that the leases had not transferred and remained with Citi Hedge.
Justice Laffoy said the application was procedurally unusual, coming more than a year after the scheme had been approved and raising a substantive dispute that would more properly be addressed in separate proceedings. She nevertheless considered the issue after both sides made full submissions.
The 2011 scheme transferred part of Citi Hedge’s business and undertaking to Citibank Europe. Under the court order, the transferring business included Citi Hedge’s rights and obligations under its contracts, while excluding specified residual business. The leases were not excluded. The judge found that the leasehold interests transferred and vested in Citibank Europe on 1 January 2012, creating a landlord-and-tenant relationship between Citibank Europe and Sisk on the leases’ existing terms.
The 2006 lease allowed termination at specified points. Its clause 5(x) made the year-three and year-eight options strictly personal to BISYS Hedge Fund Services (Ireland) Limited, Citi Hedge’s former name, and said they could not benefit a successor in title. The year-thirteen option, by contrast, could benefit a permitted assignee.
The judge held that the transfer did not rewrite the lease. The year-eight option, due on 16 November 2013, ceased to exist when Citi Hedge transferred its leasehold interest and was not capable of assignment to, or exercise by, Citibank Europe. The court said the year-thirteen option could be exercised by the tenant holding the lease in 2018 if it was a permitted assignee; Citibank Europe would qualify if it still held the lease. The same conclusions applied to the 2007 lease.
The court rejected the companies’ alternative contention that the leases had not transferred, and found that Sisk had neither acquiesced in the claimed transfer of the personal options nor waived its position. It refused both reliefs sought. The judgment resolved the application; it did not grant either requested direction.