knowledge | 20 March 2020 |
Bowling Alone: Commercial Court Declines Jurisdiction Where There Are Extant Circuit Court Proceedings
This dispute centred on Kennedy Wilson’s (“KW”) attempt to secure vacant possession of a substantial property in Dublin, known as “Stillorgan Leisureplex” .1 They intend to redevelop and have a planning application lodged directly with An Bord Pleanála in respect of a “strategic housing development”, intending to demolish the existing buildings (including Stillorgan Leisureplex and associated structures) and construct 232 ‘build-to-rent’ apartments, two retail shops and four restaurants or cafés, together with associated infrastructure.
KW have a sitting tenant (Lorgan Leisure) who are resisting KW’s attempts to gain vacant possession. Lorgan Leisure have initiated proceedings in the Circuit Court to claim a statutory entitlement to a new lease under Part II of the Landlord and Tenant (Amendment) Act 1980, as amended (the “1980 Act”). KW tried to have the matter dealt with by the Commercial Court (a fast-track division of the High Court), claiming that KW would be exposed to very considerable financial loss if an injunction requiring vacant possession was not granted. This estimated loss was based on the current rate of construction inflation which (at the time of swearing of the parties’ affidavits in January and February 2020) was running at between 6% and 7%. KW claimed that this could lead to an increase in costs of €400,000 per month or €5 million per year.
In his judgment, McDonald J thoroughly reviewed all of the relevant authorities in relation to the jurisdiction of the High Court to intervene in a case where Circuit Court proceedings are in being and where, under statute, the Circuit Court had been designated the court of relevant jurisdiction.
McDonald J extracted a number of principles from the authorities that were reviewed, which include:
(a) While the Circuit Court has been entrusted by the Oireachtas with exclusive jurisdiction in relation to disputes under Part II of the 1980 Act, the High Court, having regard to the full original jurisdiction vested in it by Article 34.3.1 of the Constitution, may, in an appropriate case, assume jurisdiction notwithstanding that the issues would ordinarily be determined by the Circuit Court;
(b) The fact that the High Court has full original jurisdiction under Article 34.3.1 does not prevent the High Court from declining jurisdiction;
(c) The High Court should respect the choice made by the Oireachtas in conferring jurisdiction on a court other than the High Court. In particular, the High Court will only be justified in departing from the process envisaged by the Oireachtas where the High Court is satisfied that, in the circumstances of a particular case, there is a serious danger that justice will not be done if the High Court declined to exercise its jurisdiction under Article 34.3.1;
(d) It is only in exceptional circumstances that the High Court will intervene where a claim to a new tenancy is pending before the Circuit Court;
(e) Thus, if a plaintiff is not in a position to distinguish its case from the general run of cases, the High Court is likely to conclude that the proceedings should be permitted to run their course in the Circuit Court; and
(f) There are certain categories of cases where it is well established that the High Court can properly exercise its jurisdiction under Article 34.3.1. These include:
- Where it is very clear that a tenant has little or no hope of success in proceedings under Part II of the 1980 Act in respect of the grant of a new tenancy;
- Where a plaintiff establishes that there is a genuine urgency which justifies the maintenance of High Court proceedings. It would appear that, in order to establish urgency, it is necessary for a plaintiff to establish that there are, essentially, special circumstances in the case which give rise to such urgency and which demonstrate that a plaintiff will suffer real prejudice if the proceedings are allowed to take their course in the Circuit Court.
Having undertaken a detailed analysis of the arguments put forward, McDonald J concluded that KW had not established that an injustice would be done to it in the event that the High Court declined to accept jurisdiction. McDonald J directed that the matter should proceed in the usual way in the Circuit Court as the matter was not sufficiently urgent to justify the maintenance of the proceedings in the High Court. Similarly, the High Court was not persuaded that Lorgan Leisure had little or no prospect of success in its application under Part II of the 1980 Act.
A novel point which was argued but not decided, was the status of renunciations and their interaction with s13 of the 1980 Act.2 That section sets out the three grounds upon which a tenant might claim a new tenancy.3 Lorgan Leisure contended that the 2019 Renunciation is restricted to its right to a new tenancy based on what is known as the “Business Equity” ground. However, Lorgan Leisure put forward the claim that the 2019 Renunciation does not extend to its right to a new tenancy based on the “Long Possession Equity” ground. Lorgan Leisure made the case that the ability to renounce the Long Possession Equity under s85(2) of the 1980 Act is limited to residential tenancies to which the Residential Tenancies Act 2004 applies. McDonald J held that, upon hearing arguments from both sides, he did not believe that there is any basis upon which he could properly conclude, at interlocutory stage, that Lorgan Leisure’s case in relation to the renunciation is likely to fail in the Circuit Court proceedings.
Mandatory Injunction Application
McDonald J went on to state that even if he was wrong in his conclusion that the High Court should decline jurisdiction, he believed that the application for an interlocutory injunction should be refused. Whilst KW had an arguable basis for the case made by it, he did not believe that KW had established a sufficiently strong case to meet the standard for the granting of a mandatory injunction as set out in the decision of the Supreme Court in Lingam v Health Service Executive.4
This case illustrates that even in circumstances where there is a risk of delay to development, with potentially significant financial implications, the correct jurisdiction should be utilised unless: (1) the principles distilled above can be surmounted; and (2) the dispute in question falls squarely into one of the exceptions where the High Court will accept jurisdiction to hear a matter which would otherwise be in the Circuit Court. In addition to this, it should always be borne in mind that in applications for injunctions that are mandatory in nature, the higher test, as set out in Lingam, will be the test to be met.
Also contributed by Darragh Murray
- KW Investment Funds ICAV v Lorgan Leisure Limited  IEHC 132.
- A series of leases had been entered into between the parties, the most recent being a Short Term Business Letting Agreement entered into on 26 February 2019. On that date, Lorgan Leisure also executed a written renunciation of rights (the “2019 Renunciation”).
- Section 13(1) sets out three grounds that can be relied upon to bring a claim for a new tenancy. Of relevance here are two of the three grounds, ss 13(1)(a) and (b), which state that Part II of the 1980 Act (Right to New Tenancy) “applies to a tenement at any time if— (a) the tenement was, during the whole of the period of five years ending at that time, continuously in the occupation of the person who was the tenant immediately before that time or of his predecessors in title and bona fide used wholly or partly for the purpose of carrying on a business (the “Business Equity”), or (b) the tenement was, during the whole of the period of twenty years ending at that time, continuously in the occupation of the person who was the tenant immediately before that time or of his predecessors in title” (the “Long Possession Equity”).
-  IESC 89;  ELR 137.
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.