Gradual Investment Ltd v Kennedy

• Jurisdiction: Ireland
• Court: Court of Appeal (Ireland)
• Judge: Mr. Justice Binchy,Ms. Justice Máire Whelan
• Judgment Date: 31 July 2026
• Neutral Citation: [2026] IECA 157
• Docket Number: Court of Appeal Record No.: 2024/291

Between/

Gradual Investments Limited

Plaintiff/Respondent

and

Des Kennedy

Defendant/Appellant

[2026] IECA 157

Whelan J.

Binchy J.

Pilkington J.

Court of Appeal Record No.: 2024/291

High Court Record No.: 2020/1600P

THE COURT OF APPEAL

Landlord and tenant – Rent – Estoppel – Appellant appealing against the judgment and orders holding that the respondent was entitled to recover a sum against the appellant – Whether insufficient weight was given to the doctrine of unconscionability

Facts: The appellant, Mr Kennedy (the tenant), appealed to the Court of Appeal against the judgment ([2024] IEHC 602) and orders of Mulcahy J in the High Court wherein he held that the respondent, Gradual Investments Ltd (the landlord), was entitled to recover against the tenant the sum of €200,791.78 together with interest thereon from 2 July 2020 at a rate of 2% and also 50% of the landlord’s costs of the proceedings, same to be adjudicated in default of agreement. There were 26 grounds of appeal directed towards three net issues for determination: (i) Is the landlord entitled to a further sum of €25,800 in rent (plus VAT, interest and costs), in addition to all sums previously paid, by reason of late payment by the tenant of the final instalment under the 2014 variation agreement? (ii) Is the landlord entitled to a further sum of €57,000 (plus VAT, interest and costs) in rent (in addition to the abated sum of €80,000 previously paid) for the year 2015? (iii) Is the landlord entitled to recover a further sum €117,911.78 (plus VAT, interest and costs) by way of rent due under the second abatement agreement (AA2)?

Held by Whelan J that the trial judge was mistaken in his assessment of detriment and insufficient weight was given to the doctrine of unconscionability as it related to that element of the estoppel claim in regard to AA2; as such the landlord was estopped from invoking any breaches of the alterations and user covenants to seek the full unabated rent for that period. As regards the landlord’s reliance on alleged non-compliance with the service charge payments covenant as a basis for treating AA2 as void, Whelan J held that that claim failed. She held that the landlord could not rely on claims based on alleged delayed payment of service charges because the Indigo notices were not valid in law for that purpose; the High Court erred in concluding otherwise. She held that the covenants had not been breached by virtue of the fact that no valid notice was served under Clause 4.10 of the lease. She held that the landlord’s failure to comply with the requirements of Clause 4.10 of the lease defeated its suggestion that a breach of covenant under either provisos (i) or (ii) of AA2 rendered AA2 void. As regards proviso (ii), she held that the intention of the parties must be gleaned from the wording of the sub-clause and the failure to include or outline the covenants which could render AA2 void therein meant that reliance must be placed on the wording and terms of the covenants within the lease itself; in those circumstances it was not open to the landlord to extrapolate the text of the alteration and user covenants from the lease the exclusion of the other relevant provisions of the lease including Clause 4.10. She found that the ground of appeal in relation to the interest laterally sought at trial by the landlord on the rent dating back to the supposed date of the breaches was also successful. She held that the exercise of the trial judge’s discretion in awarding the court rate of interest ought to be set aside.

Whelan J held that the sums payable to the landlord were €25,800 due for the period of the VA together with the sum of €57,000 for the year 2015 - in total €82,800, without interest.

Appeal allowed.

UNAPPROVED

NO REDACTION NEEDED

JUDGMENT of Mr. Justice Binchy delivered on the 31 ^st day of July 2026

1 . I have had the benefit of reading in draft the judgement to be delivered by my learned colleague Whelan J. While I am in agreement with much of the analysis contained therein, there is one part of that analysis, and the resulting conclusion, with which, respectfully, I am unable to concur. Since the issue concerned is, in financial terms, the single biggest issue falling for determination in this appeal, I find it necessary to state very briefly the basis upon which I would have reached a different result in respect of the same.

2 . The factual background giving rise to these proceedings is summarised in the judgment of Whelan J., and I gratefully adopt that summary. Likewise, I will use the same abbreviations and definitions as those appearing in the judgment of Whelan J.

3 . The issue with which I find myself in disagreement with Whelan J. concerns that part of the respondent's claim against the appellant arising from breaches of the Lease by the appellant during the term of AA2. The High Court judge found that the appellant had, in failing to comply with certain of the tenant's covenants in the Lease, also failed to comply with the second proviso to AA2. It will be recalled that the second proviso to AA2 was in the following terms:-

“Provided always that:

If:

1. …

2. Any of the covenants on the part of the Tenant whether set out in the Lease or this side letter shall not be observed or performed;

3. …

4. …

then and in any of the said cases, the terms of this side letter will immediately become null and void ab initio in which case the Landlord shall be entitled to pursue all monies owed under the Lease without reference to this side letter or the terms of the concession hereby granted.”

4 . The High Court judge found that the appellant had breached three of the tenant's covenants in the Lease. At para. 106 of his judgment, he found that the appellant had breached the covenant of the Lease whereby the tenant was required, prior to carrying out any works to the demised premises to obtain the consent of the landlord to the carrying out of any such works. The judge concluded that the effect of that breach was to render AA2 void ab initio. He reached a similar conclusion at para. 116 in respect of breach of the restrictive user covenant in the Lease. And finally, so far as breach of the conditions of the leasehold covenants is concerned, the Judge concluded that the failure on the part of the appellant to pay the service charge demanded in 2016 and 2018 in full within seven days of reminders issued to the appellant also rendered AA2 void. Consequent on the foregoing conclusions, the High Court judge further concluded that the rent which the respondent had agreed to forego (pursuant to AA2) fell due for payment by the appellant to the respondent, pursuant to the second proviso of AA2, leading the Judge to award the respondent the sum of €117,991.7 under this heading.

5 . In her judgment, Whelan J. concludes that the High Court judge erred in finding that the appellant had breached the leasehold covenant regarding payment of the Service Charges under the Lease, having regard to what she found were deficiencies in the notices (requiring payment of the Service Charges) served on the appellant on behalf of the respondent. I am in agreement with the analysis and conclusion reached by Whelan J. in respect of this issue.

6 . However, I am unable to agree with the conclusion reached by Whelan J. in respect of the other breaches of the Lease relied upon by the respondent. While the appellant does not deny having carried out alterations to and having changed the use of a portion of the demised premises, in each case without having obtained the prior consent of the respondent, he argued that absent a notice having been served by the respondent requiring the appellant to remedy the breaches pursuant to clause 4.10 of the Lease, there could be no breach of the Lease by the appellant such as to engage the second proviso to AA2. Whelan J., with whom Pilkington J. agrees, has accepted this argument, with the result that they have allowed that portion of the appeal that relates to value of the discount in the rent provided for by AA2, the benefit of which had been received by the appellant, i.e. €117,991.7. Respectfully, for the reasons that follow, I am in disagreement with that conclusion of my colleagues regarding their interpretation of clause 4.10 of the Lease, and the conclusion that flows from that interpretation.

7 . The appellant also argued that insofar his actions constituted a breach of the Lease, Mr. Birmingham's letter of March 2017 was sufficient in equity and in law to signify in writing that any breaches of the Lease in these regards had been waived. As is apparent from her judgment at para. 73, Whelan J. did not consider it necessary to reach any conclusion on the appellant's argument grounded on waiver (as least insofar as it concerned alterations to the demised premises) in light of her conclusion on the application of clause 4.10 of the Lease. Since I have arrived at a different conclusion on the interpretation and application of clause 4.10 of the Lease, I address this point briefly below.

Interpretation of Clause 4.10 of the Lease

8 . The appellant argued that the non-observance or non-performance of a covenant of the Lease must be decided by reference to the Lease, and that clause 4.10 of the Lease prescribes a “ complete scheme” for dealing with what the landlord perceives to be a breach of the same. It was argued that before the respondent could rely upon a breach of the terms of the Lease, for the purposes of the second proviso to AA2, it was necessary for the respondent to serve a notice on the appellant pursuant to clause 4.10 of the Lease, and that the respondent not having done so was precluded from relying upon the alleged breaches for the purposes of the second proviso to AA2.

9 . Clause 4.10 of the Lease is located in the part of the Lease that is under the heading of: “ Tenant's Covenants”. The opening line of clause 4...