Covid to the rescue, for once!
The High Court recently refused an application for an order winding up a company in accordance with Section 569 of the Companies Act 2014 (the "Act") on the basis that there was a bone fide dispute raised by the company as to the sum due, such that it could be below the statutory threshold of €50,000[1]. However, the more interesting dictum of the judgment in Re Lestown Property Limited[2] was the reluctance of the Court to grant the order in light of the Covid-19 pandemic.
The facts and background
The parties to the application were landlord and tenant and following a period of non-payment of rent commencing in April 2020, the applicant landlord served a Section 570 demand on the tenant Company which remained unsatisfied.
A number of issues arose in the case around what rent was actually due given there were specific provisions in the lease for rent suspension where the property could not be occupied and also the landlord's access to an insurance policy for rent and service charge arrears during such a period.
The landlord argued that the rent suspension clause applied only if the premises were in some way physically damaged such that they were unfit for occupation rather than unable to be occupied due to government restrictions as a result of the Covid – 19 pandemic. The Company argued that since Covid-19 was a notifiable disease which came within the definition of an 'insurable risk' in the Lease, the rent suspension clause was activated and operational. Therefore, the rent arrears did not arise.
Determination of the Court
Ms Justice Butler concluded that she
"did not have to decide whether the company's contention that the rent suspension provisions apply is necessarily correct… I must be satisfied that the company has bone fide and substantial grounds for disputing liability for the amount of the debt claimed and that those grounds apply to the entire of the debt or at least to a sufficient proposition of it to bring the undisputed amount below the statutory threshold".
The Court concluded that there were such grounds and refused the application. The Court also noted that the events which gave rise to the rental arrears were outside the control of both the parties, entirely contributable to the ongoing restrictions associated with the pandemic and likely to be encountered by a future tenant.
Conclusion
These concluding comments of the judgment serve as a warning to petitioners that the extraordinary nature and effect of the Covid-19 pandemic (still to be fully realised) may cause a court to exercise its discretion and refuse a application for a winding up orderwhere a statutory demand remains unsatisfied.
Written by Joanne Cooney and Mark Woodcock
The facts and background
The parties to the application were landlord and tenant and following a period of non-payment of rent commencing in April 2020, the applicant landlord served a Section 570 demand on the tenant Company which remained unsatisfied.
A number of issues arose in the case around what rent was actually due given there were specific provisions in the lease for rent suspension where the property could not be occupied and also the landlord's access to an insurance policy for rent and service charge arrears during such a period.
The landlord argued that the rent suspension clause applied only if the premises were in some way physically damaged such that they were unfit for occupation rather than unable to be occupied due to government restrictions as a result of the Covid – 19 pandemic. The Company argued that since Covid-19 was a notifiable disease which came within the definition of an 'insurable risk' in the Lease, the rent suspension clause was activated and operational. Therefore, the rent arrears did not arise.
Determination of the Court
Ms Justice Butler concluded that she
"did not have to decide whether the company's contention that the rent suspension provisions apply is necessarily correct… I must be satisfied that the company has bone fide and substantial grounds for disputing liability for the amount of the debt claimed and that those grounds apply to the entire of the debt or at least to a sufficient proposition of it to bring the undisputed amount below the statutory threshold".
The Court concluded that there were such grounds and refused the application. The Court also noted that the events which gave rise to the rental arrears were outside the control of both the parties, entirely contributable to the ongoing restrictions associated with the pandemic and likely to be encountered by a future tenant.
Conclusion
These concluding comments of the judgment serve as a warning to petitioners that the extraordinary nature and effect of the Covid-19 pandemic (still to be fully realised) may cause a court to exercise its discretion and refuse a application for a winding up orderwhere a statutory demand remains unsatisfied.
Written by Joanne Cooney and Mark Woodcock