The High Court has ruled that changes made to leases held by Monsoon Accessorize Limited in Dublin and Cork under an English company voluntary arrangement (CVA) cannot be recognised or enforced in Ireland against the landlords, because the process failed to give them an appropriate opportunity to make representations before creditors voted.
Mr Justice Denis McDonald delivered the judgment on 20 October 2020, after hearing the two sets of proceedings together. The CVA, approved by Monsoon’s creditors on 3 July 2019, purported to reduce rent on the leases and could ultimately reduce it to zero if neither side ended the leases within six months. The landlords argued that the changes should not affect their lease rights. Monsoon argued that EU insolvency rules required the CVA to be recognised.
The court accepted that the creditors’ approval was a judgment and composition falling within Article 32 of the EU Recast Insolvency Regulation, which generally requires recognition without further formalities. But Article 33 permits refusal where recognition would be manifestly contrary to the State’s public policy.
The judge found that the Irish landlords’ property rights were constitutionally protected and that Irish law required a fair opportunity to make representations before a decision could interfere with those rights. The creditors’ meeting had no mechanism for landlords to put their position before all creditors voting, including those who had already submitted proxies. The court also found uncertainty over whether the landlords could effectively challenge the CVA in England, and held that the possible challenge did not cure the procedural defect.
The ruling was limited to the procedure used in this CVA and its effects on the Irish leases. The court did not decide whether the CVA’s effects also breached substantive Irish constitutional law, nor whether the approval was invalid under English law. It rejected the landlords’ estoppel argument based on a solicitor’s letter, finding no evidence of detrimental reliance. It also rejected Monsoon’s reliance on res judicata, issue estoppel and the rule in Henderson v Henderson.
In the Cork proceedings, the court separately held that Monsoon’s Irish company, Monsoon Accessorize Ireland Limited (MAIL), remained liable under the lease licences. Although described as guarantor, MAIL had undertaken primary obligations, and the licences expressly provided that lease variations would not release or reduce its liability. The judge said this conclusion would apply even if the CVA were enforceable in Ireland.
The court directed the parties to prepare a draft order recording that the CVA’s lease variations were not entitled to recognition or enforcement in Ireland on public policy grounds, and that MAIL’s obligations were unaffected. The parties were to seek agreement on costs; if they could not, written submissions were due within 14 days of judgment, after which the judge would rule.