Ireland's High Court supports Landlord's refusal of consent on the grounds of good estate management

The central argument of the Tenant's case was that the Landlord's refusal to grant consent for the assignment was driven by an ulterior motive, specifically to gain possession of the premises through a lease surrender at a lower value.

A witness for the Tenant gave evidence that the Landlord had approached the Tenant in September 2020 to express an interest in purchasing the premises and to inquire as to the purchase price.

This testimony did not convince the court that an ulterior motive existed.

Simons J. referred to the case of Dunnes Stores (Ilac Centre) Ltd v. Irish Life Assurance plc which established that a landlord is not necessarily precluded, while an application for consent is pending, from entering into negotiations with the Tenant. 

Simons J. recognised that it would not be permissible for the Landlord to threaten to refuse consent to an assignment as “leverage” to acquire the premises at a lower value, nor would it be permissible for the Landlord to refuse consent in an attempt to acquire the property at an undervalue. However, he pointed out  that the Tenant had publicly advertised the premises for sale, and there could therefore be no valid objection to the Landlord expressing a potential interest in acquiring the premises by surrender.

Another factor which undermined the Tenant’s theory was that the Landlord had indicated a willingness to consider any commercial use that complements the shopping centre. The Landlord had not, as it would in theory have been entitled to do, sought to hold the Tenant to the use prescribed under the Lease which was for a licensed premises (public house).

The Tenant could not produce any documents evidencing an ulterior motive on the part of the Landlord, though it is worth noting that the Tenant had not sought discovery. 

The Landlord's position was that the proposed use was unsuitable for a multi-unit shopping centre. The Landlord and Tenant relied on the expert testimony of estate agents to elaborate on the issue.

Simons J. preferred the evidence of the Landlord's more highly qualified witness whom he noted had extensive experience in relation to the letting of shopping centres. Simons J. was satisfied that the expert evidence established that it is important that there be a good mix of retail uses in a multi-unit shopping centre and that dead frontage is to be avoided. The court found that no contrary expert evidence was put forward by the Tenant.

The court noted that a striking feature of the case was that the Tenant failed, at any point, to provide any detail to the Landlord as to what might be involved in the community centre use, still less to adduce evidence as to relevant factors such as operating hours, footfall, dwell times and car parking demand.

The court also expressed concern about a potential conflict of interest, as the Tenant's expert witness was also the estate agent responsible for the proposed sale of the premises. His fee for marketing the premises (1% of the purchase price) was contingent on a successful conclusion of the sale, which depended on a successful outcome to the legal proceedings. 

The expert witness for the Tenant had failed to disclose his financial interest in his expert report. Simons J. suggested that in future, any such interests should be stated in express terms, and it should not be left to the court to infer the existence of a financial interest.