The High Court refused applications by Linen Supply of Ireland Limited to end five leases at premises in Dublin and County Galway, ruling that the company could not repudiate them under section 20 of the Companies (Amendment) Act 1990 and refusing the examiner’s alternative application to disclaim them.
Mr Justice Brian J. McGovern delivered the judgment on 4 December 2009, after a hearing on 2 and 3 December. The company was in examinership, with Kieran Wallace of KPMG appointed examiner. A meeting had been called for 7 December to prepare a scheme of arrangement, which the judge said placed time constraints on the hearing and the detail of his reasons.
The company sought court approval to repudiate leases at Bluebell Industrial Estate, Unit 34 Fonthill Industrial Park in Dublin 22, Unit C Concorde Industrial Estate on Naas Road in Dublin, GalwayWest Business and Retail Park in Rahoon, County Galway, and Units 3A and 3F at the Plaza, Parkwest Business Park in Dublin 12. It said the properties were surplus to requirements and the rents were too great a financial burden. The examiner said a scheme could not be put forward while the rental liabilities remained.
The landlords opposed the applications. They argued that section 20, which concerns contracts with obligations beyond payment, did not apply to leases. The judge agreed, concluding that allowing repudiation under that section would conflict with section 25B, which restricts schemes from reducing or extinguishing rent due after a scheme takes effect without the landlord’s written consent. He therefore refused the company’s application.
The examiner’s alternative application sought transfer of directors’ powers and leave to disclaim the leases using powers available to a liquidator. The judge noted there was no evidence of mismanagement or that curtailing directors’ powers was needed to preserve assets or safeguard the company, employees or creditors. He also considered the examiner’s view that the proposed investor would not provide further support while the leases remained in place.
The judge held that the examiner’s proposed use of disclaimer powers to prepare a scheme could not overcome section 25B’s restrictions in the absence of landlord consent. Given the landlords’ objections, he refused the examiner’s application too. The judgment did not approve repudiation or disclaimer of any of the five leases.