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Cite as: [2004] IEHC 155

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HC 284/04

THE HIGH COURT

2004 No.10396P

Between:

Barnaton Investments Limited

Plaintiff

And

Robert O'Leary and Radius Pie Limited

Defendants

Judgment of Mr. Justice Michael Peart delivered the 30^th day of July 2004:

The plaintiff is currently the owner of an investment property in Cork, having by Deed of Assignment dated 31^st May 2002 acquired same from an associated company,

Blasco Properties Limited which by Indenture of Lease dated 4^th August 1999 had

leased portion thereof on the Ground Floor to two persons, namely Seamus O'Connell and John Magee, who in turn executed a Deed of Assignment in respect of their interest to the second named defendant company which is presently in occupation. It appears that Messrs. O'Connell and Magee, with others, were co-sponsors with the first named defendant of the second named defendant company at the time the lease was entered into in August 1999, and the reason why the assignment to the company took place was that Messrs O'Connell and Magee had ceased to be involved in the company, and it was thought best to have the leasehold interest transferred to the company. The company operated a restaurant business in the premises. There are other tenants of the plaintiff in other areas of the building.

Central to the facts of this application is the fact that for some reason not conclusively ascertained, but presumably through some oversight, it appears that the landlord's consent to the assignment by Messrs O'Connell and Magee of the lease to the company was never obtained, and of course there is the usual covenant in that regard contained in the lease at clause 39 thereof. That clause reads:

"Not to assign, sublet or part with or share possession or permit the occupation by a licensee of the demised premises (or suffer any person to occupy the demised premises as licensee or concessionaire) without the prior consent in writing of the lessor, such consent not to be unreasonably withheld and not to assign, underlet or part with or share possession or permit the occupation by a licensee of part of the demised premises under any circumstances whatsoever."

Clause 32 is also of relevance to this application, and it reads as follows:

"Not without the consent in writing of the Lessor first obtained, nor except in accordance with plans and specifications previously submitted to the satisfaction of the Lessor to erect or suffer to be erected any new building or erection on the demised premises, or make any alterations or additions whatsoever either externally or internally in or to the demised premises or any building or erection which may be erected thereon.

The restaurant traded over the past couple of years since the lease was granted. But it closed down recently and considerable works have been carried out to the interior of these restaurant premises in recent times by the company, and a full Restaurant Cerificate has now been obtained with a full Publican's licence attached. Therefore the plaintiff has now in occupation without his consent a limited liability company which has carried out extensive internal work, and some exterior, in respect of which no plans and specifications were submitted for approval. The plaintiff in these circumstances seeks the reliefs set forth in the notice of Motion herein dated 2^nd July 2004 as follows:

1. An order directing the defendants to vacate forthwith the premises known as Unit 3, 27-29 Courthouse Chambers, Washington Street, Cork pending the determination of these proceedings.

2. An order directing the defendants or either of them to cease the works being carried on by them or either of them within and on the said premises Unit 3 aforesaid and Unit 9, Courthouse Chambers aforesaid, affecting the structures of the premises Courthouse Chambers as a whole and the said units 3 and 9 aforesaid, pending the determination of these proceedings.

On the 2^nd July 2004, injunctive relief was granted to the plaintiffs on an interim basis in terms similar to number 2 above- in other words to cease work on the premises. The matter is now before this court by way of motion seeking interlocutory relief in respect of paragraphs 1 and 2 set forth above. Put briefly, the plaintiffs want the defendants to vacate the premises because they have no title to be there since there was no consent to the assignment of the lease to the company either before the assignment was made. Neither has it been either granted or sought subsequently.

Before this Court also is an application on behalf of the plaintiff to be permitted to amend the claim by the addition of two reliefs, the first being for an order that the defendants cease trading in the premises pending the determination of these proceedings and until such time as a Fire Safety Certificate has issued in respect of the altered premises, and the second being for an order that the defendants remove all items affixed by them to the exterior of the premises, to include four chiller units and a satellite television dish. These latter items have been attached to one of the outside walls of the premises, again without any consent and contrary to clause 32 of the lease.

It is important to point out again, as I stated at the commencement, that the present landlord of the premises, the plaintiff, acquired its interest from an associated company, and the current property manager, William O'Mahoney had previously fulfilled that role for Blasco. The present occupier of the premises, Radius Pie Limited took an assignment from two of its own original promoters. For all practical purposes there has been no change of personnel, other than in name, on both sides of this matter. The same people have been dealing with each other on the ground so to speak. I will return to that aspect later.

I should also point to another relevant background matter – that is that there is rent claimed to be owing by the tenants in the sum of €43,308.03. In fact this appears to be owing not to the plaintiff in these proceedings but to the plaintiff's predecessor in title, Blasco Properties Limited, since the dates in respect of which the rent is due predates the assignment of the landlord's interest to the plaintiff company. However, the defendants say that it is not owing in fact, and that it is a sum which is disputed since there was some arrangement that a reduced rent would be payable at the outset of the term, while the business got off the ground and that this matter has not been agreed as yet with the landlord. However these arrears of rent have been referred to in submissions on behalf of the plaintiff company.

The defendants' architect has sworn an affidavit in which he has averred that the works being carried out in the restaurant premises constitute a "re-fit" of the restaurant and that nothing of a structural nature is being undertaken. In effect, he says, what used to be an open plan interior is now broken up into sections by the use of partitioning. This partitioning is not load-bearing and provides no structural support. He says that the premises continue to operate as a restaurant. He avers that the works which have been carried out have not increased the size of the kitchen or the seating capacity of the restaurant area. The plaintiff's consultant engineer on the other hand says that some work has been done to the external structural walls to facilitate the installation of what is described as chiller pipework, and he is of the view that all the works in the premises constitute material alterations and that they should not have taken place until the necessary fire safety certificate approval is issued.

The first named defendant has sworn a replying affidavit on behalf of both defendants. He says he has known the said William O'Mahoney for the past three years since he took over the running of the restaurant. He says that William O'Mahoney has visited the premises on many occasions – at least once a week, and that all his dealings with both the plaintiff company and its predecessor, Blasco, have

been made through him. He says that the second named defendant, Radius Pie Limited is a company that was formed in 1999 for the purpose of running the restaurant. He names eight individuals who were involved in the company, including Seamus O'Connell and James Magee who he describes as "the cheque signatories". Those two individuals are the named tenants on the lease entered into at that time. He goes on to say that he himself provided the finance by way of a loan to the company in order to fit out the restaurant. He says that in 2001 Seamus O'Connell and James Magee and others left the company, at which stage he himself was owed a sum of about €340,000, and that he took over the running of the company and the restaurant. It was in these circumstances that the assignment of the lease from Seamus O'Connell and James Magee to Radius Pie Limited took place on the 21^st November 2002. He also says that he believed that the landlord had consented to the assignment as he was aware that the company's then solicitor had been in touch with Messrs Arthur Cox, solicitors for Blasco about such consent, and he also states that he has recently become aware of discussions and correspondence between his solicitor and Mr Frank Murphy, solicitor of Gleeson, McGrath, Baldwin, solicitors now acting for the plaintiff company. He also says that Messrs O'Connell and Magee have had no involvement with the restaurant since 2001 and that Mr O'Mahoney the property manager has been aware of this fact. He says that since that time he has dealt with all matters with the landlord related to the restaurant, and that Radius Pie Limited has paid the rent, rates and service charges, and that he himself has been the signatory on the company's cheques. He says also that it is well known to Mr O'Mahoney and the plaintiff company that these payments have not been made on behalf of Messrs O'Connell and Magee. Relevant to that assertion is the fact that Mr O'Mahoney has exhibited in his affidavit a copy of what purports to be a letter dated 22^nd July 2002 from a Mr Tony Leonard, Managing Director of the plaintiff company addressed to the said John Magee in which it is stated:

"I refer to our meeting last week with Billy O'Mahoney in Cork. You confirmed the position with the lease that yourself and Seamus O'Connell are the lessees of the above and that the monies we are receiving are being paid to us on your behalf. As discussed, I hope to be in Cork again shortly and if you wish to meet up you can contact me at the above number.

As requested, through Billy, I attach copy of statement of account for the

above."

Mr. O'Leary says that he is a stranger to that letter, but if what appears in that letter represents reality at that time in July 2002, it certainly contradicts what Mr O'Leary has stated in relation to those persons having no involvement with the company or the restaurant since 2001 and that Mr O'Mahoney is aware of that fact. However I cannot resolve that issue of fact at this stage.

Mr O'Leary sets out at paragraph 7 of his affidavit a number of matters which he says indicate that Mr O'Mahoney is fully aware of the fact that Messrs O'Connell and Magee are no longer involved since 2001. He also states that he has kept Mr O'Mahoney fully informed with regard to the alterations to the premises, and the recent licensing application. He even goes so far as to state that the works which have been carried out have been consented to by the plaintiff company. I presume that this is a reference to Mr O'Mahoney being aware of what was happening, rather than that there was an application for such consent in writing and a furnishing of such consent in the usual way.

Mr O'Leary says that it is not the intention of the second named defendant to change the business from that of a restaurant. He says that a full licence was sought for the purpose of providing a fuller service to patrons in order to attract more customers. He acknowledges that some advertising material describes the new operation as a "Lounge Bar Restaurant" but says that this was for advertising purposes and in fact the premises is a restaurant with a full bar licence. He says that the seating capacity is the same and the number of employees is unchanged at 32, with 75% of these being engaged in relation to food. He says that if the injunction is granted to the plaintiff irreparable damage will be suffered by the company, and its reputation, and that damages would not be an adequate remedy. He also says that the rent and service charges are being paid as fall they due, and that there is no loss to the plaintiff company, and that the balance of convenience lies with refusing the relief sought pending the determination of the issues arising in the case.

Mr O'Mahoney has sworn a further affidavit in which he states that it is clear from Mr. O'Leary's affidavit that he was well aware that the lease was in the name of Messrs O'Connell and Magee and that no consent had been obtained to the assignment to the company, and that it is not credible for him to say that he was not aware that the plaintiff company had not consented to the assignment. He also says that there is very good reason why consent to the assignment was not sought, and that is because Mr O'Leary was well aware that there was €43,308.03 owing in respect of arrears of rent.

Mr O'Mahoney says that the first discussion between him and Mr O'Leary about the works to the restaurant was on 24^th June 2004, and that it was on that date that the plaintiff's solicitors wrote to the defendants to cease the work. He says that prior to that date the defendants had closed the restaurant, and that prior to the 24^th June 2004 there was no indication that works were to be carried out, and no consent was sought.

Further affidavits have been filed but there is no need for me to detail the contents. They deal with matters that are clearly relevant but as far as this application for interlocutory relief is concerned, I believe that I have set forth any facts which are material to the decision as to whether an interlocutory injunction ought to be granted pending the determination of these proceedings.

Clearly there are issues to be determined in these proceedings, such as whether the works carried out are in the nature of structural works and/or whether they are works in respect of which the landlord's consent is required in advance under the terms of the lease. In addition there is an issue as to whether the failure to obtain the landlord's consent to the assignment to the company in advance and in writing renders the assignment void, or whether that lacuna simply gives rise to other remedies. Linked to that issue, I suppose, would be whether if consent had been applied for, there are any circumstances whereby it would have been reasonable for that consent to have been refused, such as the outstanding rent due to Blasco, or the fact that the assignee is a limited company and not an individual. That latter point could be addressed by the requirement of a personal guarantee from Mr O'Leary or another suitable person, but that is not a matter for now. There is also an issue as to whether the chiller units and the satellite dish are additions to the exterior of the premises such as are caught by the prohibition against affixing any items to the outside walls. So there is no difficultly in the court coming to a conclusion that there is a fair issue to be tried, and the resolution of these issues will certainly require oral evidence, and no doubt some discovery of documents.

The question which next arises is whether damages are an adequate remedy for the plaintiff. On this question it is difficult for me to see what their loss is. If they are correct in their assertion that the assignment to the company is void because no consent was given or even sought, then the lease to Messrs O'Connell and Magee is still extant, and I have no evidence that those persons are not a mark for what would be their liability for the rent, and service charges. In fact the rent and charges are currently being paid by the defendant company, and in the event that no interlocutory injunction is granted the probability is that this rent will continue to be paid in the present fashion by the second named defendant.

If the injunction is granted, and it turns out that it ought not to have been granted, then the defendants can benefit from the undertaking as to damages given by the plaintiff, and again there is no suggestion that the plaintiff is not a mark for any damages which may arise on foot of that undertaking such undertaking. Of course damages which could arise can be difficult to quantify where they arise due to an ability on the part of the defendants to trade in the newly renovated restaurant. It is safe to assume that in that regard that the new fit out and renovation of the premises was carried out with a view to increasing the turnover and therefore the profit from the operation, when compared to the level of business carried out historically. Historic figures would not be an accurate guide for the purpose of assessing future loss, and if the new premises has never had the opportunity of trading, on what basis would the defendants' damages be measured? That is a question relevant to the question of whether the balance of convenience nevertheless favours the refusal of relief at this stage.

If the plaintiff is correct that the second named defendant has no right or entitlement to be in occupation of the premises in the absence of a consent to the assignment to them, they will no doubt be entitled to an order directing them to vacate, and presumably to restore the premises to the state which preceded their unlawful occupation. That means that instead of receiving rent from Radius Pie Limited, they will be able to receive rent from Messrs O'Connell and Magee, who presumably will on the facts as known to the Court be none too willing to discharge same since they have apparently ceased to have any involvement in the company. It may be that in that event they would have some come-back against Mr O'Leary and/or Radius Pie Limited on foot of whatever agreement was entered into at the time of the severance of their relationship with the company.

It seems to me that commonsense, if not the law, would dictate that what should happen in the present situation is that the plaintiff company ought to consent to the assignment to Radius, but on condition that a personal guarantee is given by Mr O'Leary, and provided that at least an agreement is reached in relation to the arrears of rent, if any, due to Blasco, so that the company's occupancy of the restaurant is regularised, and that thereupon approval should be given in respect of the works which have been carried out, so that the plaintiff can then continue to receive its rent from the actual operator of the restaurant, rather than revert to the previous lessee in that regard. Radius Pie Limited can then trade out of the restaurant in respect of which it has expended no doubt a significant sum of money.

All that of course would be on the basis that the works which have been carried out meet all Fire Safety and other building regulations, if any, and provided that the business being carried out or to be carried out in the newly refurbished premises will not be such as to cause the plaintiff to be in breach of any covenant which it has with other tenants in their premises.

However when litigants meet head to head, it is sometimes difficult, for all sorts of reasons, for the concept of commonsense to prevail. There may well be some background to this case which has not yet emerged. However I need not say any more for the moment, but I feel compelled to make some comment, as I have, about the desirability as I see it, of taking a long term view of the practicalities in this case.

I have listened carefully to the submissions made on behalf of the plaintiff by Mr Felix McEnroy SC, and on behalf of the defendants by Mr Hugh O'Neill SC. I will not summarise these submissions in this judgment. I have reached the conclusion firstly that there is a fair issue to be tried, and I have no difficulty in deciding that any loss which the plaintiff may suffer (although as I have said I find it difficult to see how they could be at a loss for the reasons I have identified already) can be adequately compensated for in damages. But I am equally satisfied that even if I am wrong in that and have overlooked something, the balance of convenience clearly and easily lies in favour of refusing the relief sought so that this restaurant can trade while these proceedings are brought to trial and determined.

It seems to me that the worst that can happen as far as the plaintiff is concerned is that they win the case at hearing, succeed in getting vacant possession of the premises from the second named defendant, and revert to the earlier situation of having Messrs O'Connell and Magee in occupation of a premises which they do not want, and collecting rent from them. That situation might well result in those parties then applying for consent to a fresh assignment to Radius Pie Limited, and unless it was reasonable to refuse such consent, everybody would be back in the positions which they occupy at the moment.

That may be a somewhat nonsensical result bearing all the facts and realities of this case in mind, but from a legal point of view that could well be the result. To grant the relief sought would also inevitably result in the second named defendant company ceasing to trade with the consequent lay off of 32 staff members, and all the other financial consequences which do not have to be spelled out in this judgment. That is a further consideration, though one which if it were the only one, might not be sufficient to justify the refusal of the order sought.

I therefore refuse the relief sought in the plaintiff's Notice of Motion dated 2^nd July 2004.

In relation to the plaintiff's second motion seeking leave to amend their claim by the addition of reliefs related to the absence of a Fire Safety Certificate, and for an order for the removal of items fixed to the exterior of the premises, I suspect that there is no need to make any order on that motion. Firstly it appears that a Fire Safety Certificate has now issued, and in relation to the other relief, I presume that any amendment can be achieved in the Statement of Claim which no doubt can be delivered speedily, but I will hear the parties in that regard.

Approved by Mr. Justice Michael Peart.