A claim through the doctrine of frustration remains, as ever, extremely frustrating to succeed in.
Introduction
The recent
Background
In this case, the plaintiff tenant,
The Plaintiff was forced to close its retail Premises for the period between
The Appeal
In appealing the decision of the
The Plaintiff argued that the
- An invitation for the courts to create "new law"; and
- Terms within the lease.
An invitation for the courts to create "new law"
In this case the Plaintiff asked that the
The Plaintiff referred to English authorities on frustration, in particular
"...several English authorities demonstrate temporary impossibility (in the context of a particular venture) can, in exceptional circumstances, excuse non-performance..."
A summary of the Plaintiff's argument is as follows:
"...that there is no reason, in principle, why a concept of temporary frustration should not be given legal recognition and that it would be consistent with the common law's varying rationales for the doctrines of frustration and the temporary suspension of obligations. It submits, therefore, that it should be possible for the Court to sanction the temporary suspension or discharge of obligations under a contract rather than the discharge of that contract, in its entirety, and that, in this case, there are compelling grounds to suspend its obligation to pay rent while the Covid-19 measures and regulations prevented or frustrated the very essence of the user contemplated by the lease.".
Terms within the lease
Another essential part of the Plaintiff's appeal was that it could not, by reason of the Covid-19 restrictions introduced by ministerial regulations, use the Premises as a "high quality retail shop", as provided for in Clause 3.19 of the lease or keep the Premises open "at all reasonable times during the usual business hours of the locality" for carrying on the Plaintiff's business, as permitted under Clause 3.19.2.
Judgment and analysis
The Defendant contested the Plaintiff's appeal and arguing that the Plaintiff's claim would require the Court to:
"...revisit and overturn decades of well-established precedent which is grounded on unimpeachable principle which would amount to a radical departure from established principle."
The Court of Appeal ultimately had two key issues to consider:
- An invitation for the courts to create "new law"; and
- If there is, has the Plaintiff established an entitlement to a declaration that the lease has been partially or temporarily frustrated?
The overarching issue in this appeal was whether supervening events, in the form of the Covid-19 regulations, changed the express allocation of risk by the parties to the lease to the degree that the lease is "partially" or "temporarily" frustrated (to the extent that such a concept exists in Irish law).
Barniville P. declared that:
"In the present appeal,
The Court held that such flexibility does not apply to the case at hand, particularly since it is a lease, and one of a lengthy nature whereby it must be assumed that the parties envisaged the possibility of circumstances changing over the term. Therefore, the Court held that the cases cited by the Plaintiff were distinguished as they did not involve clauses similar to those in the present lease.
Like O'Moore J in the
With respect to the two covenants in its lease relied on by the Plaintiff (the "user" and "keep open" covenants), the Court noted that those covenants impose obligations on the Plaintiff and do not confer rights or entitlements on it. They are intended to be for the benefit of the lessor, the Defendant, and not the lessee, the Plaintiff.
The Court held that the terms in the lease precluded the Plaintiff from using the premises for any purpose other than a "high quality retail shop". The lease also imposed an obligation on the Plaintiff to keep the premises open "at all reasonable times" and "during the usual business hours of the locality" but this could not be construed as imposing an obligation on the Plaintiff to open the store when it was not legally permitted to do so.
The Court noted that a number of the leases considered in the case law cited contained very similar covenants to the "user" and "keep open" covenants relied upon by the Plaintiff. The fact that those arguments had failed in those cases further undermined the Plaintiff's attempt to distinguish its appeal from previous case law.
Having heard the legal arguments of both the Plaintiff and Defendant, Barniville P. held that:
"...the [
In concluding his analysis of the terms of the lease, Barniville P. stated:
"...[the covenant] provisions of the lease, when properly construed as conferring no legal rights or entitlements but imposing only obligations, provide no support for
Conclusion
It is clear from the
Although government-imposed restrictions seem like a distant memory, their effects continue to be examined by the Irish Courts. The law in respect of the frustration of contract remains the same with the
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
7-8
URL: www.philiplee.ie
© Mondaq Ltd, 2024 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source