Court dismisses re-entry claims as res judicata but allows proprietors' detinue claim for contents.

THE SUPREME COURT

APPEAL NO. 2006 433/434

Kearns J.

Macken J.

Finnegan J.

BETWEEN

RAYAN RESTAURANT LIMITED, DJAMEL MENNAD AND FATIMA ZOHRA-AZIZI

PLAINTIFFS/APPELLANTS

and

CATHERINE MURPHY-FLYNN AND BY ORDER JOSEPH RALPH SWEENEY AND P.J. DWYER

DEFENDANTS/RESPONDENTS

Judgment of Mr Justice Finnegan delivered on the 27th day of March 2009

This is an appeal from an order of the High Court (Quirke J.) made on the 12th October 2006. There is no copy of the

order before the court. However from the approved note of the hearing the appellants’ claim against the first named

respondent was dismissed on the ground that the issue of re-entry for non-payment of rent and determination of the first

named appellant’s lease had already been determined in earlier Circuit Court proceedings. The appellants’ claim against the

second and third named respondents was struck out on the grounds that it was bound to fail as the issue of the legality of the

re-entry for non-payment of rent and determination of the lease had already been decided in the Circuit Court proceedings

and that decision was binding on the appellants.

For ease of reference and for consistency when referring to the Circuit Court proceedings and the proceedings in the High

Court the subject matter of the appeal I propose referring to the capacity of the parties in each of those proceedings and

hereafter refer to them in the matter hereinafter indicated. In relation to the High Court proceedings:

Rayan Restaurant Limited (hereinafter “the company”). The company at all material times was the lessee of premises held

under the lease hereinafter mentioned.

Djamel Mennad (hereinafter “D.M.”) and Fatima Zohra-Azizi (hereinafter “F.Z.A.”) (hereinafter together “the proprietors”)

are entitled to the entire issue shared capital in the company and are the directors of the company.

Catherine Murphy-Flynn (hereinafter “C.M.F.”) is the widow of Barra Flynn (hereinafter “B.F.”) now deceased. B.F. at the

date of his death was entitled to the lessor’s interest in the lease. He personally affected the re-entry. He died prior to the

hearing of the Circuit Court action and C.M.F. was substituted for him as defendant to represent his estate. Under the terms

of the will of B.F. deceased she became entitled to the lessor’s interest in the lease.

Joseph Ralph Sweeney and P.J. Dwyer (hereinafter together “the executors”) are the executors of the last will and testament

of B.F. deceased probate thereof having been granted to them on the 26th April 2005.

By lease dated the 20th day of December 1996 and made between B.F. of the one part and C.M.F. of the other part

(hereinafter “the lease”) premises situate at High Street, Athlone, Co. Westmeath (hereinafter “the premises”) were demised

unto C.M.F. for a term of thirty five years from the 1st January 1997 subject to the yearly rents thereby reserved and the

covenants on the part of the lessee and conditions therein contained. The lease contains a proviso for re-entry should the

rent or any part thereof be unpaid for twenty one days after becoming payable. The company became entitled to the

lessee’s interest under the lease by assignment dated the 1st day of August 2002. At all relevant times the rent payable under

the lease was €45,000 per annum payable quarterly in advance. As a condition of consent to the assignment of the lease the

company paid a deposit of one quarter’s rent to B.F.

The parties to the Circuit Court action were the company plaintiff and Julia’s Company Restaurant Limited, Claudia Pascau

and B.F. defendants and D.M. third party. Following the death of B.F. on consent C.M.F. was substituted as a defendant to

represent his estate. The issues between the company and the first and second defendants and the third party issue between

the second defendant and D.M. are of no concern to this appeal the concern being confined to the issues between the

company and B.F.

The Circuit Court Proceedings

The premises were formerly an antique shop. At the time that the company obtained an assignment of the lease the premises

required considerable works to make them suitable for use as a restaurant. These works were carried out by and at the

expense of the company or alternatively by and at the expense of the proprietors and it is claimed cost approximately

€150,000. Rent amounting to €36,000 was paid while the works were being carried out. A gale of rent fell due on the 1st

July 2003. On the 24th July 2003 in reliance on the proviso for re-entry B.F. using a key re-entered the premises and took

possession of the same and excluded the company therefrom. Immediately a cheque for the outstanding gale of rent was

tendered to B.F. who refused to accept the same. The Circuit Court Civil Bill was issued on the 15th August 2003 in which

the reliefs sought by the company were an injunction to put it back into possession of the premises and damages.

The matter came on for hearing on the 16th and 17th November 2004 and judgment was delivered on the 18th November

2004. The company’s claim against C.M.F. was dismissed with costs to C.M.F. On C.M.F.’s counterclaim the court made a

declaration that the lease had been lawfully determined and awarded C.M.F. the costs of the counterclaim. Against that

order the company appealed. By order of the High Court dated 18th April 2005 it was ordered that the company should

furnish security for costs. On the 26th June 2005 the amount of security was assessed at €51,000. The company failed to

furnish security and by order dated the 23rd January 2006 the appeal against the orders made in favour of C.M.F. was

struck out. The orders of 18th April 2005, 26th June 2005 and 23rd January 2005 were not appealed.

The High Court Proceedings

The High Court proceedings were instituted on the 24th October 2005 after the order requiring security for costs to be

furnished was made but prior to the appeal being struck out. It is reasonable to infer that the principal purpose of instituting

the proceedings was to re-litigate the claim made by the company in the Circuit Court. As will appear hereafter, however,

that was not the sole purpose. Originally the sole defendant was C.M.F. On the 27th March 2006 she issued a motion

seeking an order striking out the proceedings as an abuse of process pursuant to the inherent jurisdiction of the court or

alternatively as failing to reveal a reasonable cause of action. On the 2nd May 2006 the executors were joined as co-

defendants. The executors promptly issued a motion seeking to have the proceedings struck out on the like grounds as had

C.M.F. Both motions came on for hearing on the 12th October 2006. The company’s claim against C.M.F. was struck out

on the basis that the issues raised therein are res judicita having regard to the order made in the Circuit Court proceedings.

The proprietors’ claim against C.M.F. were dismissed on the basis that no cause of action was disclosed against her as at the

relevant time she was not the owner of the premises nor was she the executor of B.F. deceased. The claims of the company

and the proprietors against the executors were struck out on the basis that the legality of the re-possession of the premises

had been determined in the Circuit Court proceedings, there was issue estoppel and the claims were bound to fail. It is

against these orders that the appeal is taken.

Discussion

I would record that while the company was professionally represented by solicitor and counsel in the Circuit Court

proceedings they acted personally in the High Court and on this appeal. It is not surprising therefore that the proceedings in

the High Court and in this court have been attended by considerable confusion. There is a great volume of documentation

running to some five tightly packed ring binders. The documentation is a mix of pleadings, affidavits, exhibits,

correspondence, unsworn statements and submissions on the law. The documents are not arranged chronologically or in any

logical sequence. It would greatly assist this court where such a situation arises if the represented party would prepare a

booklet, furnish a copy of the same to the other party and file copies of the same with the court the booklet to contain the

pleadings and core documents.

The sole issue in the Circuit Court was whether the lease had been determined by re-entry. Relief against forfeiture,

surprisingly, was not claimed although in the particular circumstances of this case where the outstanding rent was tendered

immediately upon re-entry one would expect relief to be granted almost as a matter of course. Unless this course was

adopted on the express instructions of the company then the company is entitled to at least an explanation as to why relief

was not sought at or immediately after the hearing. No issue was raised in relation to the contents of the premises. The issue

as to the lawfulness of the re-entry and determination of the lease having been determined against the company and an

appropriate declaration having been made it is not open to the company to re-litigate that issue. The interest of the estate of

B.F. deceased was represented in the Circuit Court by C.M.F. who also represented her personal interest as the beneficiary

in respect of the premises under the will of B.F. deceased. There is privity of estate between the estate of B.F. deceased as

represented by C.M.F. and C.M.F. personally as entitled under the will of B.F. deceased and the executors. For that reason

the company’s claim that the lease had not been determined by re-entry cannot now be litigated against the executors

notwithstanding that they were not parties to the Circuit Court proceedings. The learned High Court judge in holding that

C.M.F. had no interest in the premises at the relevant time was in error: C.M.F. was joined as a party to the Circuit Court

proceedings to represent the estate of B.F. This however makes no difference to the outcome of her application to the High

Court as by reason of privity of estate between B.F. deceased, C.M.F. and the executors the issues sought to be raised

against her are res judicita. Insofar as the proprietors seek to litigate in the High Court proceedings the issue of the

determination of the lease I am satisfied that to do so is an abuse of the process of the court. The company acted through its

directors, the proprietors, who are also between them entitled to the entire issued share capital of the company. Each of

them was present throughout the hearing in the Circuit Court. They cannot now be heard to maintain a claim to the lessees

interest under the lease in conflict with the claim maintained in the Circuit Court that the company was so entitled and to

seek to do so is an abuse of the process of the court. Had they wished to maintain a personal claim to the lessee’s interest

under the lease it was appropriate to do so in the Circuit Court proceedings: Henderson v Henderson [1843] 3 Hare. 100

and Carroll v Law Society of Ireland [2003] 1 I.R. 309. They may not maintain such a claim indirectly in an action qua

shareholder for diminution in the value of their shares in the company: Foss v Harbottle 2 Hare. 492, Robinson v

Chartered Bank L.R. 1 Eq 32, O’Neill v Ryan [1993] I.L.R.M. 557. Accordingly the claims of the company and the

proprietors relating to the re-entry and the termination of the lease are not maintainable in these proceedings.

An Additional Claim

The statement of claim raises an issue additional to the matters litigated in the Circuit Court. Included at paragraph (d) in the

statement of claim is the following:-

“(d) We, the plaintiffs, do hereby say and affirm that the landlord upon locking us out, continued to operate

the restaurant as a going concern using all the original equipment and facilities which were our specific

property and furthermore were being used without our written permission. This trading situation has

prevailed up to the present juncture. The use of our assets and facilities to carry on a going concern business

without any reference to us the plaintiffs by way of seeking written permission or coming to some alternative

arrangement with us is blatantly illegal and represents despicable and deplorable behaviour on the part of the

landlord and we are hereby seeking a remedy in law for this infringement of our rights.”

The paragraph pleads facts sufficient to ground a claim in conversion or in detinue by the company and the proprietors. No

such claim was made in the Circuit Court proceedings. Before the High Court and this court a large volume of invoices gives

support to the claim that much of the restaurant contents were paid for by the proprietors. In this court there was a

concession that the restaurant contents are still retained and in daily use by the caretaker operating the restaurant on behalf

of C.M.F. and no basis was suggested which could justify the situation. Above the restaurant premises is an apartment.

Elsewhere in the papers before the court it is stated that within the apartment were personal items the property of the

proprietors which are detained by the respondents. Insofar as the company makes claim in respect of the contents of the

restaurant that claim is so closely related to the issue in the Circuit Court proceedings that it could and should have been

raised in those proceedings but was not raised. The company had legal representation in the Circuit Court. In these

circumstances I am satisfied that it is an abuse of process by the company to refrain from making the claim in those

proceedings and now to seek to maintain that claim in the High Court proceedings: Henderson v Henderson [1843] Hare

100 and Carroll v Law Society of Ireland [2003] 1 I.R. 309. It appears from papers before the court that a conscious

decision was made not to pursue a claim by the company to the contents as it was assumed that on an order being obtained

putting the company back into possession of the premises the contents would be recovered. The company’s claim must

accordingly be struck out. However the proprietors were not parties to the Circuit Court proceedings save and except in

relation to issues between Miss Pascau and the company in respect of which D.M. was a third party. In these circumstances

I am satisfied that they are entitled to maintain a personal claim in respect of the contents of the premises including the

overhead apartment. No issue of res judicata or abuse of process arises in relation to this claim by the proprietors.

Conclusion

I would affirm the order of the High Court dismissing the claim of the company and of the proprietors against C.M.F. and

striking out their claim against the executors insofar as the claims relate to the re-entry and determination of the lease. In

addition I would strike out the company’s claim in detinue and conversion. Insofar as the proprietors claim in detinue and

conversion in relation to the contents of the premises, however, they are entitled to maintain that claim in these proceedings.

The proprietors are not professionally represented in the High Court proceedings. It is advisable that they should seek to be

represented. The statement of claim should be amended so that only the claim now permitted to be maintained by the

proprietors is contained therein. It would seem an unnecessary complication and will give rise to additional expense if it is

necessary that both C.M.F. and the executors are maintained in the action as defendants particularly as to date they have

been separately represented: for that reason I would allow fourteen days within which C.M.F. and the executors should

consider their position and if possible write to the proprietors informing them that they accept that either C.M.F. or the

executors are the correct defendants against whom the action should be continued. Should they fail to so agree this will be a

matter to which the court of trial may have regard on the issue of costs. I would give liberty to the proprietors to deliver an

amended statement of claim within six weeks from the date hereof or within such further time as may be agreed or as may

be allowed by order of the High Court.

Rayan Restaurant v Murphy & Ors