Vol 13 (2016) - Issue 3

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Imperfect Pies: ‘Ulterior Motive’ Behind Landlord’s Refusal to Consent to Lease Assignment – Irish High Court Considers the Issue of Unreasonable Withholding of Consent

A. Introduction
In its recent decision in the case of Perfect Pies Limited (in receivership) and Pearse Farrell v Chupn Limited, the Commercial division of the Irish High Court has considered the difficult question of the unreasonable withholding of consent to the assignment of a commercial lease. It is rare for this matter to be considered in such detail by the High Court and the judgment is therefore of particular significance.
This case involved interesting issues, specifically around a landlord potentially seeking to use the opportunity of an application for consent to assignment to pursue 'ulterior motives' – in this case, to obtain possession of the premises.

B. Legal background
Before turning to the facts of the case at hand, it is important to have an understanding of the basic position in Ireland with regard to restrictions on assignment.
Under Irish law, a tenant has the common law right to assign or dispose of its interest in the premises, subject to any contractual restriction that might be set out in the relevant letting agreement. In the case of a property which is a 'tenement' within the meaning of section 5 of the Landlord and Tenant (Amendment) Act 1980, there is statutory provision which modifies any covenant in a lease or contract of tenancy absolutely prohibiting or restricting alienation either generally or in any particular manner, such that any such covenant 'shall have effect as if it were a covenant prohibiting or restricting such alienation without the licence or consent of the lessor'. The legislation goes on to provide that such licence or consent shall not be unreasonably withheld in the case of a lease affected by the aforementioned provision or any other lease restricting alienation without licence or consent.
Consequently, in any case where a tenant challenges its landlord’s refusal to grant consent to an assignment of the lease to a particular proposed assignee, the court has to decide whether a such refusal is unreasonable or not. Unlike the position in England and Wales, in Ireland the onus of establishing that the landlord’s withholding of consent is unreasonable falls on the tenant. The landlord is also not obliged to give any reasons for his refusal initially, provided he gives good reasons later (ie at the court hearing).

C. Overview of the facts
This case relates to the Café en Seine premises on Dawson Street, Dublin (the 'Premises') which have for some time been occupied by Perfect Pies Limited (the 'Plaintiff') on foot of three separate leases (the 'Leases'). Pearse Farrell (the 'Receiver') was appointed receiver over the Plaintiff ’s assets, to include the leases relating to the Premises, in December 2009. Chupn Limited (the 'Defendant') is a company within the group of companies owned and controlled by Mr Louis Fitzgerald (the 'Fitzgerald Group') and acquired the freehold interest in the Premises in October 2010.