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High Court Rules in Favour of Landlords in Restructuring Cases

The High Court in two recent unrelated decisions ruled in favour of landlords of retail multiples, which raise interesting questions in relation to the restructuring of insolvent lessees generally.

In the matter of New Look Retailers (Ireland) Ltd and in the matter of the Companies Act, 2014 [2020 No. 272 COS]

In the first of those decisions Mr Justice McDonald dismissed a petition to appoint an examiner to New Look Retailers (Ireland) Limited, which is part of a UK based group comprising New Look Retail Holdings Ltd and its subsidiaries.  In this case, it was submitted by New Look that the company was likely to become insolvent by October 2020.  The court accepted that the petitioner had met the insolvency test but exercised its discretion to decline to appoint an examiner on the basis that it was premature as the company was unlikely to become insolvent for another six months and that the company should have engaged to a greater extent with the landlords opposing the petition from whom rent reductions were required. Although every decision is necessarily decided on its own unique facts, this decision is notable in that it is the first case of this type in which a lack of advance engagement  with landlords has formed part of the basis upon which to dismiss an examinership petition.  We have included the full judgment here.

Apperley Investments Limited, Tailwind Investments Limited and Martina Investments Limited -v- Monsoon Accessorize Limited [2019 No.6256 P] / R.E.S.A.M. Cork U.C. and R.E.S.A.M. Properties Limited -v- Monsoon Accessorize Limited and Monsoon Accessorize Ireland Limited [2019 No.5745 P]

The second case concerned separate proceedings brought against Monsoon Accessorize Limited, an English company, and it’s Irish subsidiary Monsoon Accessorize Ireland Limited by the company’s Irish based landlords which were tried together given the similarity of the proceedings. Here, the same judge, Mr Justice McDonald refused to enforce a judgment of an English court sanctioning a creditors’ voluntary arrangement (CVA) on the basis that the failure to afford Irish landlords fair procedures in connection with the meeting at which the CVA was approved was not required to be given effect in Ireland under the Recast European Insolvency Regulation (EUIR), as to do so would infringe Irish public policy. The basis for this conclusion was that creditors had not been given an opportunity to make representations which all creditors could consider in advance of casting their votes, which constituted a breach of fair procedures to which the landlords were entitled in circumstances where their property rights were being affected.  Again, this is a first- the public policy exception under the EUIR has not been invoked by an Irish court previously. The judge was at pains however to stress that as long as adequate safeguards were deployed in any future CVA, the Irish courts would have no difficulty enforcing it.  We have included the full judgment here.