THE HIGH COURT
2001 No. 563 S
BETWEEN
CRUMLIN INVESTMENTS LIMITED
PLAINTIFF
AND
JAMES MOUNTAINE
DEFENDANT
DECISION of the Master of the High Court delivered on the 22nd February 2002
1. The Plaintiff’s motion for liberty to enter final judgment for £61,834.11 inclusive of £10,230.29 for services, (in effect all rent due from February 1999 to April 2001) was argued before me more extensively than is usually the case, both parties submitting Books of Authorities to assist. This occurred because there had been some discussion of my being conferred, with the consent of both parties, with the same jurisdiction as that of a High Court judge to deal with the matter. This discussion was not altogether fruitful and the result is that the Defendant now asks me to deal with the motion on the basis that there is a “contest” apparent, of the sort which obliges me to transfer the motion to the Judge’s list ( 0. 37, r. 6).
2. The plaintiff, on the other hand presses me for judgment, contending that the material put before me by the defendant discloses no contest in the sense that no defence is raised which answers his client’s claim.
3. If there is a contest, I cannot adjudicate on it’s merits. Of course, logically I do have to decide the jurisdictional issue - whether or not there is a contest in any real sense, or whether what the defendant urges in any case is effectively an empty formula.
4. It seems, I am sure, strange to the parties that I should have to devote so much time to hearing submissions on these points when the entire may have to be rehearsed afresh at a later date if it is my view that a contest exists. That duplication of effort is however of the nature of summary proceedings. All going well for a plaintiff, he may get his judgment without much delay or expense. If, on the other hand, a defendant disputes the Plaintiff’s use of summary proceedings as appropriate to the circumstances of the case the dispute becomes a question of procedure, and the real issues are deferred to another day.
5. That said, it seems to me that procedures cannot be allowed to cause or prolong injustice. In a sense the defendant’s main submission is a refined and cogent argument that Equity must intervene in these proceedings and allow him set off his claim as lessee, against the plaintiff lessor, for damages for what he alleges has been the mismanagement of the shopping centre. In separate proceedings (1997 13728P) the plaintiff is seeking more, in terms of quantum, than is being sought in these proceedings by the lessor for arrears of rent. There would be injustice if, where turnover in the shopping centre has fallen well short of (alleged) expectations, the retailer lessee were to have to continue to discharge rent in full. That is obviously true. It is also true that it would be equally unjust to the lessor for it to have to bear all the financial consequences of the turnover shortfall, borne in on it in the form of a unilateral rent strike, until such time as the lessee’s Plenary proceedings are heard. The law must do its best for both parties and not permit a procedural device to be played to the advantage of one.
6. Firstly, let me say that it is clear that I cannot decide whether the basis exists for the defendant’s case for damages, or that the defendant is entitled to an equitable set off on the basis of such case. I am precluded by the Rules from doing anything with a motion except to transfer it when one party asserts, and the other refutes, an Equitable entitlement to set off. That is a “contest” and except in very rare circumstances such as when no material is before me to support such an assertion, I must treat it as such, and transfer it.
7. In this particular case, however, I had to hear submissions from both parties not for the purpose of enabling me to assess or adjudicate the merits of the “counterclaim” - the defendant’s separate proceedings - but to evaluate the plaintiff’s contention that I should not view the circumstances as having the substance of a “contest”, the precise word employed in Order 37 Rule 4.
8. The Plaintiff submits that in consequence of the intervention of Statute (in the form of s.48 of Deasy’s Act) the rent payable can only be subject to deduction or set off in respect of “ a liquidated sum due by the landlord” and cite the analysis of that section by Maguire P. in Mc Causland v Carroll 1938 72 ILTR 158. The damages now claimed by the defendant were neither liquidated or due when the rents claimed were payable. The defendant cited English decisions in favour of lessees who have suffered losses at the hands of lessors (and their managing agents) whose neglect of pursuit of the oversell interests of a shopping centre was similar to the sort of neglect complained of in the defendant’s Plenary proceedings. It was suggested that Equitable set off was accepted as available in such instances, and that the decisions took a broad brush approach to the interconnectability of the rent covenant and the covenants on the part of the lessor which had not been performed.
9. Can equity assist the Defendant at this stage in these proceedings? The plaintiff thinks not, arguing that the Rules of Court, particularly of the Circuit Court but also albeit perhaps only by implication, of the Superior Courts deal with non payment of rent cases in terms which characterise the rent obligation as qualitatively different from other terms. It is as if the Rules anticipated the observations of Carroll J. in Sweeney v Powerscourt 1984 IR 503 (a re-entry case) that “ the commercial viability of a shopping centre may well depend on all the tenants paying their rents and service charges promptly”, confirming that rent provisions are perhaps the most fundamental of all lease terms (breach of which unlike other terms, entitles prompt re-entry for which equitable relief against forfeiture will only be available if all arrears are paid - breach of other covenants may trigger the slower s.14 notice mechanism).
10. The weight of argument and precedent favours the Plaintiff. I am not satisfied that an Equitable set off is available in this jurisdiction in these circumstances, and I must therefore conclude that there is no contest shown, and no answer to the Plaintiff’s claim.
11. It is therefore not necessary to consider the application of the balance of Equity, the allegation that the defendant is delaying his proceedings, the fact that his claim is in separate proceedings and not a counterclaim in these proceedings, or the assertion that the rents charged are a relatively small overhead for the lessee given current turnover levels : these would be considerations if an Equitable set off were available to the lessee, but I fear it is not.
12. I will accordingly give leave to enter judgment for the sum claimed.
13. I now turn to consider the defendant’s application for a stay on the judgment. As with most applications for a stay, the judgment debtor puts his case on the basis that he hopes or expects to be in a position to satisfy the judgment in early course and would like an opportunity to do so before the judgment is entered formally, and/or before execution can be commenced.
14. In this case the basis of such expectation and/or hope is that he is seeking damages from the judgment creditor in other proceedings. Before deciding on whether or not to grant a stay I am of the view that I should not accede without first making some cursory assessment of the debtor’s prospects in the said proceedings. If they are apparently without realistic prospect of success I cannot ignore that impression. Contrariwise, if the debtor’s case was unanswerable a stay would be appropriate. Courts often have to make first impression assessments of causes of action and do try in the process to avoid significant injustice, often by imposing strict time limits on completing intermediate pre trial steps.
15. In fact, I have before me not only the pleadings in the debtor’s case but also significant quantities of correspondence, exhibits and reports. I have sworn testimony also. I have perused all of this and I do not propose to rehearse it. In my view the debtor/plaintiff faces significant difficulties in establishing, in the teeth of the express provisions of the lease, the basis of the lessor’s liability pleaded. He then has to prove a causal link between the acts or omissions of the lessor and the fall off in turnover to which he avers - the lessor's own expert, Donald C Mc Fetridge, refers to the shopping centre as being “in phase three of the “wheel of retailing” i.e. The vulnerability phase, “where it is vulnerable to new competition from retail developments elsewhere and ... faces eventual decline” (4 June1998). The lessor’s managing agent Brian Cleary of Druker Fanning and Partners avers that Shopping Centre retail space in Dublin has increased by over 300% (i.e. a fourfold increase?) since the opening of Crumlin Shopping Centre. There is an allegation of contributory negligence, and the lessor can point to significant capital expenditure on the refurbishment of the centre since the proceedings commenced in November 1997 : some £1½ million was spent in 1999 and Mr Cleary states that it is “a very attractive shopping centre” and exhibits photographs to illustrate.
16. The lessor has the further hurdle of proving the quantum of loss. His case appears to be pitched at about 20%, that is, that business would have been 20% better if the lessor had managed the centre as it had either been represented, allegedly, to the lessor’s predecessor in title or contractually committed itself by implied term. One would have thought that these circumstances would have fed through into the rent payable by means of the review thereof (last review date 1996) but clause 3 (3) of the (1975) lease provides that the review shall be upwards only. Is it significant that although paragraph 11 of the Statement of Claim (October 1998) pleads “ a reduction in levels of turnover and profitability ... serious loss and damage” there are no particulars of special damage. Losses were still “unascertained and continuing” as at the furnishing of particulars in November 1999, until stated by letter of 10th January 2000 to be £2 million “and (unspecified) cosequential losses.”
17. But when we finally see the detail of the lessee’s claim, in the report of Michael Norris in February 2000, we see instead the figure of £510,000 made up of
Lost profits 124,000 (From November 1991) Service charges 8000 Interest 78000 Goodwill 100,000 Consequential loss 200,000
18. With additional interest and losses into the future (ie. after January 2000). I append Mr Norris’s two page report to this judgment for ease of reference.
19. Given that the basic loss of profits claim averages at a little over £15,000 per annum (with the after tax loss significantly less, one presumes) and given the clearly arguable basis of the other figures (indeed, even the loss of profits figure is largely a guesstimate) I am of the view that the plaintiff in these proceedings cannot be deprived of all rent on the strength of what I know of the lessee’s case as above outlined.
20. In my view the lessee has about a 25% chance of recovery in about £150,000 damages in say two years time, after the trial. I should stay this judgment, therefore only to the cumulative extent of £40,000 by then. Accordingly I propose to grant a stay on the judgment in the lessee’s favour provided 66 2/3 % of all rent and service charge arrears (not just the sum claimed in these proceedings) are paid within eight weeks hereof, the stay to remain in place pending the trial (or dismissal for want of prosecution) of the lessee’s case provided 66 2/3% of all rent falling due hereafter is paid on the due dates.
21. Although the figure is arrived at by a somewhat unscientific approach, I believe the interests of justice for both parties are fairly balanced by means of this formula.