Costa Coffee gets order preventing wind up attempt over rent dispute

The operators of Costa Coffee cafes in Ireland have obtained a High Court order preventing the landlord of its Dundrum Town Centre outlet applying to wind up the firm.

The winding-up move came in a dispute over unpaid rent arising out of closure of food outlets at the centre during the pandemic.

MBCC Foods (Ireland) Ltd sought the injunction restraining Campbell Catering Ltd, trading as Aramark Food Services Ireland, from presenting a petition to wind up MBCC pending determination of the dispute over rent.

The court heard MBCC, which employs some 2,000 in its 155 outlets in the Republic and Northern Ireland, and also operates 12 KFC restaurants, has had a lease since 2018 with Aramark in Dundrum Town Centre at an annual rent of €200,000. Its cafe is in the food hall on level three of the centre.

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Significant disruption

There had been significant disruption of its business over the last 15-16 months due to government restrictions and guidelines, it says.

MBCC director Michael Conway said in an affidavit, since March last year, at the beginning of the first lockdown, Aramark had blocked access to the food hall, save for a brief period before Christmas.

That blocking-off was “wholly in excess of any reasonable system of control which might have been required” under government guidelines, he said.

Even though dine-in services were permitted by the Government last August, the food hall remained blocked off, he said. In a letter to MBCC the previous month, Aramark demanded payment of rent and that MBCC comply with a “keep open” clause in the lease, something which was “discordant and illogical”, he said.

Gary McCarthy SC, for MBCC, in a one-side-only represented application to Mr Justice Senan Allen on Wednesday, said Aramark had said earlier this month, unless it was paid €367,000 rent by Thursday July 22nd, it would seek an order from the court for the winding-up of MBCC.

MBCC then brought proceedings seeking to restrain that move.

MBCC is not an insolvent company and is in a position to pay its rent, which was accepted by Aramark, counsel said. It had put the money sought into an escrow account pending resolution of the matter.

Counsel said there was a genuine dispute to be resolved here through litigation in circumstances where the food hall had been closed for almost the entirety of the pandemic.

Substantial grounds

There are substantial grounds on which to resist the winding-up petition, he said. A proposal to Aramark that the matter be referred to arbitration met the response that arbitration did not apply to rent payments, he said.

It was their case the lease had been frustrated by the pandemic and his client has been prevented carrying out its business despite the fact at times the Dundrum centre itself was open.

There were a number of “thorny and difficult” issues to be dealt with in this case including that MBCC was given to believe there would be some form of rent reduction which was not pushed by his client as its premises were not available. They were not matters to be dealt with in the context of a winding-up application, he said.

Mr Justice Allen said he was not immediately convinced by the argument that every lease in the country was frustrated by the lockdown.

However, he would place great weight on the fact that MBCC was able to pay its rent and had given an undertaking as to damages in the context of the injunction application.

He made an interim order restraining Aramark presenting the petition and said the matter could come back next week.