Gunne v Pembroke Estates

• Jurisdiction: Ireland
• Judgment Date: 15 May 2000
• Date: 15 May 2000
• Court: Circuit Court

An Chuirt Chuarda (The Circuit Court)

Gunne Estate Agents (Dublin)

Plaintiff

Pembroke Estates Management Limited

Defendants

Abstract:

Landlord and tenant - Land law - Conveyancing - Consent to assign lease - Guarantor of lease required - Landlord required guarantor to act as principal obligor and not merely as surety - Use of guarantee set out in precedent book - Whether form of guarantee sought by landlord unreasonable - Whether landlord had unreasonably refused consent to assign lease.

The court would consider all the relevant facts of the case in deciding whether it was reasonable for a landlord to demand that a guarantor of a lease be jointly and severally liable for the performance of covenants and conditions contained in the lease. The plaintiff had sought to assign the lease and the defendant had furnished a guarantee which it required to be signed by the guarantor of the new tenant. The plaintiff objected to the said guarantee complaining that it was too onerous. The plaintiff subsequently brought proceedings claiming that the defendant as landlord was unreasonably withholding its consent to an assignment of the lease. Judge John F. Buckley held that in the present case such a guarantee was not suitable and declared that the landlord had accordingly unreasonably refused consent to the assignment of the lease.

1 Judgement of Judge John F. Buckley delivered the 15th day of May 2000

2 The Plaintiff is a well-known firm of estate agents which has been the tenant of premises at 176 Pembroke Road, Ballsbridge, Dublin since 1981 under the terms of a lease made the 8th day of March 1978 between Luxembourg Investment Company Limited of the one part and Tuca Carpet Tile Ireland Limited of the other part. In 1998 the Plaintiff found that these premises were superfluous to its requirements, having located its business in a larger building across the road. and decided to dispose of their leasehold interest. A disposal was subject to the consent of its landlords, the Defendants, in whom the lessors interest in the 1978 lease had vested.

3 The Plaintiff arranged to sell its leasehold interest in the premises to Cellular Connections Limited at a price of £250000. Cellular Connections was a reasonably recently formed company with a short trading history and it was conceded by the Plaintiff that the Defendants would be entitled to seek a Guarantor of the payment of the rent and the performance and observance of the covenants and conditions on the tenants part contained in the lease. Cellular Connections is an agent of Eircell Limited and Eircell indicated that it would be willing to act as guarantor for Cellular Connections for the entire of the remainder of the lease.

4 The Plaintiffs solicitors submitted a draft form of guarantee to the Defendants Agents Finnegan Menton, whose principal, Mr John Finnegan is a major

5 shareholder in the Defendants. The Defendants were not happy with the form of guarantee submitted and instructed their solicitors to prepare their own draft which was sent to the Plaintiffs solicitors for their approval. Agreement could not be reached on the form of guarantee to be used and on the 21st January 2000 the Plaintiff issued an Equity Civil Bill claiming a declaration that the Defendant’s refusal to consent to the assignment was unreasonable, seeking an injunction requiring the Defendants to consent or an order dispensing with the necessity for such consent and damages for breach of duty and/or breach of contract. The Defendants delivered their Defence on the 21st February which, inter alia, denied that the Defendants were unreasonable in consenting to the proposed assignment on condition that the proposed guarantor would join in and execute a form of licence for assignment and change of use incorporating a guarantee in the form annexed to the Defence. The Defence also required the Guarantor to be jointly and severally liable with the proposed assignee.

6 The essential differences between the form of guarantee which the Defendants sought and that which the Plaintiff offered were

7 1. The Defendants guarantee required the assignee and the guarantor to enter into joint and several covenants to perform and observe the covenants in the lease and the...