The High Court has refused a petition to wind up Lestown Property Limited over unpaid rent and service charges, finding that the company had bona fide and substantial grounds to dispute whether the sums were due during COVID-19 restrictions.
In a judgment delivered on 22 July 2021, Ms Justice Nuala Butler said the dispute concerned a rent suspension clause in the company’s lease. She did not decide whether that clause ultimately relieved the company of liability. The question at this stage was whether the dispute was substantial enough to prevent the company being deemed unable to pay its debts for the purposes of the winding-up application.
Lestown Property Limited leased a unit at Charlestown Shopping Centre for use as a Leisureplex, with public access normally through an adjoining cinema. The landlord said €338,572.77 in rent and service charges was outstanding when it brought the petition in February 2021. The company acknowledged that the sums had not been paid, but disputed its liability. It had lodged €153,233.75, the amount in the statutory demand, with its solicitor.
The company argued that government restrictions imposed during the pandemic, and the resulting inability of patrons to access or use the premises, engaged clause 8.15 of the lease. That clause provided for rent and service charges to be suspended if insured damage made the premises, or a reasonable means of access, unfit for use or occupation. The landlord argued that the clause required physical damage and that there was no evidence of a COVID-19 outbreak at the shopping centre or Leisureplex.
Justice Butler held that the company’s interpretation was arguable. The lease allowed the landlord to insure against risks beyond those ordinarily associated with physical damage, and the policy included a notifiable-disease provision extending “damage” to certain government-ordered closures. The judge said she did not have to decide whether the restrictions fell within clause 8.15; it was enough that the company had raised a bona fide dispute on substantial grounds.
The parties also disputed periods when the business might have reopened. The company had operated for four weeks from 20 August 2020 before being required to close again. The judge observed that brief periods when the premises could have opened during a rent quarter did not necessarily establish liability for the whole quarter under a clause that suspended rent by reference to periods of unfitness. She did not determine how much, if any, rent was payable for those periods.
The court concluded that the statutory test for deeming the company unable to pay its debts had not been met and refused the relief sought. The judgment also said that, even if that test had been met, the court would have been reluctant to wind up the company given the lodged sum, the exceptional restrictions, and the unresolved contractual dispute. The judgment did not determine the parties’ ultimate liability for the arrears.