Bewley’s loses court battle over €1.4m annual rent

Bewley’s Cafe yesterday said that it was "immensely disappointed" at a Supreme Court decision which means it must continue to pay annual rent of €1.46m on its Grafton Street cafe until the next review in three years’ time.

The move comes after a company of developer Johnny Ronan won its Supreme Court appeal against a finding the €1.46m annual rent payable on the Grafton Street cafe must be allowed fall to reflect market rates.

The decision concerning the meaning of a clause in Bewley’s lease with Ickendel Ltd means Bewley’s must continue to pay annual €1.46m rent up to the next rent review in 2017.

The cafe company has been paying €728,000 annual rent since 2013 when the High Court ruled in its favour.

The case was taken after Bewley’s rent doubled to €1.46m at its last rent review date of January 1, 2007, which Bewley’s argued, reflected the peak of the “unsustainable property bubble”.

The “oppressive” rent payable to Ickendel, part of the Treasury Holdings Group whose loans have been transferred to Nama, was double the market rent set in January 2012, it said.

Bewley’s had sought “an acknowledgement of the economic reality and fair treatment with a rent that reflects market values, but this had been blocked by Nama and the landlord,” it said in a statement after the judgment.

The dispute required construction of the terms of the 35-year lease agreed in 1987 between Bewley’s and Ickendel with built-in rent reviews every five years.

A five-judge Supreme Court yesterday unanimously allowed the appeal by Ickendel against the March 2013 High Court decision of Mr Justice Peter Charleton in favour of Bewley’s.

While Ms Justice Mary Laffoy stressed the issue of construction was not an issue of general application to rent review clauses but was concerned only with a specific clause in this specific lease, legal sources said the outcome of the case was of considerable interest to many commercial tenants and their landlords.

Bewley’s had claimed its lease allows rents to fall as well as fluctuate upwards, while Ickendel claimed the terms meant rents cannot fall. The High Court had heard various reports indicated commercial retail rents have fallen by over 50% while a 2013 judgment in the Circuit Court fixed a new rent on a Grafton street property at just 53% of the previous rent.

Ickendel argued the Bewley’s lease provided for a term of 35 years with five yearly reviews from January 12, 1992. The parties intended there would be six successive five-year periods for which the rent could be reviewed and the lease could not be construed as having any other effect, it contended.

Giving the Supreme Court judgment, Ms Justice Laffoy upheld the arguments of Ickendel concerning how the lease should be construed.

The court was concerned with construing rent review provisions in a commercial lease which, broadly speaking, are articulated in conventional terms, she said. If Ickendel was correct, the rent payable was €1.46m but if Bewley’s was correct, it was some €728,187.

The terms of the lease meant the yearly rent payable from January 1, 2007, to December 31, 2011, was €1.46m and continues to be payable by Bewley’s for a five-year term from January 2012, she found.

The parties did not bargain for a rent revision arrangement based on a “market rate” that can rise and fall in respect of different review periods, she found. The end result of the relevant provisions of the lease was an “upwards only” review effect notwithstanding it was not expressed in those terms.

While the High Court had found there was an ambiguity in the lease related to the term “the preceding period” which could be resolved by resorting to a commercial construction of the document, there was no such ambiguity, she added. Bewley’s had accepted, if there was no ambiguity, no question arose of a commercial construction.


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