Two Irish landlords of the liquidated Monsoon business have won a High Court challenge in which they claimed their leases to the women's fashion stores remained in full force here despite a UK creditors arrangement.

Apperley Investments Ltd, Tailwind Investments Ltd and Martina Investments Ltd were landlords to the former Monsoon store on Dublin's Grafton Street.

RESAM Cork UC and RESAM Properties Ltd were landlords for the Monsoon store and the Accessorize store, both on Patrick Street, Cork.

On Tuesday, Mr Justice Denis McDonald found that a UK creditors voluntary arrangement (CVA) was not entitled to be recognised here in relation to both landlords’ lease agreements with Monsoon companies.

The court heard the total annual rent payable for the Irish stores was €735,000 and the CVA would effect significant reductions in rent for them.

The Dublin landlords sued Monsoon Accessorize Ltd, the UK parent. The Cork owners also sued Monsoon Accessorize and the Irish arm, Monsoon Accessorize Ireland Ltd (MAIL).

Liquidation

The Irish arm went into liquidation while the UK parent was placed in administration and later bought out by one of its owners.

The Irish landlords sought a declaration that their Irish leases were unaffected by the CVA – approved in July last year in the UK by 84 per cent of Monsoon creditors – and that the leases continue in full force.

They alternatively sought a declaration that the CVA, insofar as it purported to modify their leases, was not entitled to be recognised in this State on grounds it would be manifestly contrary to public policy.

This, it was claimed, was in accordance with a 2015 EU regulation, the Recast Insolvency Regulation, which determines the proper jurisdiction for insolvency proceedings and applicable law requiring mandatory recognition in other EU member states.

The Monsoon defendants opposed the application on a number of grounds including that the Irish landlords could have attended the meeting where the CVA was approved by 84 per cent.

Both cases were heard together before Mr Justice McDonald last May who reserved his decision. The following month, he was told of the UK administration move and the Irish liquidation had since taken place.

Notwithstanding that, the judge was asked to complete his judgment because it would assist in quantification of claims to be made by the Cork and Dublin landlords in the administration and liquidation processes.

Challenged

On Tuesday, the judge said the possibility that the CVA could have been challenged before the English courts was not sufficient to displaced his conclusion that there was a fundamental failure to provide an appropriate opportunity to the Irish landlords to make representations to UK creditors meeting which made a decision which would have significant effects on their property rights.

While great respect must be paid to another EU member’s legal system, he had to conclude the procedural unfairness and outcome of the CVA process against the Irish landlords would violate fundamental principles of the State under the EU regulation.

Irish leases

He granted a declaration that, under the EU insolvency regulation, the CVA was not entitled to be recognised or enforced here insofar as it purported to effect any variations to the Irish leases. To do so would be manifestly contrary to public policy, he said.

He also granted a declaration that the lease obligations of the MAIL company under a licence agreement it had with the Monsoon company, were not discharged, or in any way lessened or affected, by the CVA.

Costs will be decided later if there is no agreement between the parties, he said.