Court rules that POD leaseholders acted in 'bad faith'
Published 01/07/2015 | 02:30
A COMPANY and three men who agreed to take over the POD nightclub in Dublin acted in bad faith when they delayed signing a lease with owner John Reynolds, the Commercial Court has ruled.
Altomoravia Ltd, and Thomas Anderson, Colin Dolan and Michael Ormond, who acted as guarantors for the lease; "engaged in an entirely unscrupulous attempt" to gain concessions in relation to building work at the Harcourt Street club, Mr Justice Brian Cregan said.
He ruled Mr Reynolds was entitled to have the lease contract rescinded along with damages for misrepresentation which will be decided later. Mr Reynolds sued Altomoravia and the three guarantors arising out of the failure to execute a settlement over a lease agreement first made in April 2012.
Altomoravia and the three men had previously sued Mr Reynolds seeking that he complete the April 2012 lease but that case was settled on the basis that all parties would execute the lease by the end of March 2014. Subsequently however, further difficulties arose and it was not executed. Mr Reynolds then brought his proceedings.
Mr Justice Cregan, finding in favour of Mr Reynolds, said the defendants found out after the March 2014 settlement that it would cost €750,000 to repair water damage to the building.
They clearly had not factored this into their negotiations for the settlement, the judge said. They had perhaps made "a bad bargain" and sought to impose an extra condition before signing the lease so that Mr Reynolds would pay for the works.
The court heard Mr Reynolds bought the POD premises in stages from 1993 to 1998.
He was "caught in the economic downturn" with borrowings of €10m from AIB, secured on the premises, the bank appointed a receiver to Pod Entertainment Ltd which owned the lease, Mr Justice Cregan said. Altomoravia and the three men agreed to take over the lease in April 2012.
Difficulties arose in relation to a fire exit which could only be used with permission from the owner of an adjoining property. When the neighbour was not prepared to continue the arrangement which Mr Reynolds had enjoyed, the defendants sought planning permission, without notifying Mr Reynolds, for alternative works to meet fire safety requirements.
Mr Justice Cregan said Mr Reynolds objected as he was concerned the works would diminish the value of the historic property.
In the March 2014 settlement, Mr Reynolds agreed to withdraw any objections to the fire safety permission application. Mr Justice Cregan said that after that settlement the defendants unilaterally delayed the closing date for the execution of the lease.
They prevaricated and "added entirely spurious new conditions" which they accepted had been resolved as part of the court settlement earlier in March 2014.
Mr Justice Cregan refused the defendants' application for specific performance. He set aside the March 2014 settlement on grounds the defendants' breach of the essential condition that it be executed by March 26, 2014.