The High Court has refused to order the winding up of a company where the company was unable to pay its debts due to the Covid 19 pandemic. The case is In the Matter of Lestown Property Limited and In the Matter of the Companies Act 2014.
The tenant had not paid rent on its leisureplex in Charlestown Shopping Centre since the introduction of the Covid 19 restrictions in April 2020. The restrictions obliged the leisureplex to close or restrict the numbers who could enter the premises.
The tenant claimed that certain provisions in the lease between the parties allowed it to withhold rent during this period. The landlord did not agree and applied to the High Court to wind up the company on the grounds that it was unable to pay its debts. At the time the application was brought the threshold amount of debt was €50,000.
If the tenant had a bona fide dispute about the liability for the debt, then case law down through the years has shown that a court will not make a winding up order.
The tenant argued that it could rely on the rent suspension clause in the lease as a consequence of the Covid 19 measures implemented by the State.
The High Court held that there was a genuine dispute between the parties as to the suspension clause in the lease. For this reason, the Judge refused to grant the winding up order.
She was happy to do so even if she was satisfied that the tenant was unable to pay its debt and she exercised the court’s discretion to refuse the application.
The court also held that even if there was not a bona fide dispute she would not wind up the company in circumstances where the non-payment arose from events outside the control of the parties, such as has existed with the Covid 19 pandemic
Courts will exercise discretion when asked to wind up companies where the difficulties giving rise to the application have arisen from Covid-19 restrictions.