Since it opened in 1963, the Stillorgan Bowl, or Leisureplex, has played host to generations of children’s birthday parties in South Dublin, offering up snooker, pool, Quasar, an adventure play area and of course ten pin bowling. 

The facility is used by a number of clubs and community groups including several Special Olympics clubs.  It employs 55 staff, some of whom have never worked elsewhere.

Now its days appear to be numbered, courtesy of a €100 million strategic housing development project proposed for the 1.33 hectare site.  KW Investment Funds has secured planning permission to knock down the Leisureplex, and put in its place, 232 “build-to-rent” apartments. 

But Lorgan Leisure, which runs the entertainment complex, is refusing to give up vacant possession of the buildings, a move KW claims is costing it millions in delayed construction costs. 

This has led to a double-whammy of litigation centred on the provisions of the Landlord and Tenant (Amendment) Act, 1980 in respect of commercial letting deals, provisions that were described by a High Court judge back in the 1980s as “revolutionary”.

Late last year, the leisureplex owners initiated Circuit Court proceedings against KW in a bid to protect their tenancy. KW responded with a High Court writ aimed at ousting the business and securing vacant possession of the property in order to allow the demolition to begin. 

The High Court leg of the dispute was heard last month before Mr Justice Denis McDonald. This week, his judgment was published. In it, he sets out his reasons for refusing KW’s application for a mandatory order for possession of the bowling alley on jurisdictional grounds. 

That means the status quo is maintained, for now. If the parties continue down the legal route, they will have to thrash out the dispute in the Circuit Court proceedings. 

KW argued delays to the building project were costing it millions

Before going into the detail of the case, it is perhaps worth noting that this is not quite the David and Goliath battle it might outwardly appear to be. While KW is linked to US real estate giant Kennedy Wilson, making it a serious player, Ciaran and Colum Butler, the directors of Lorgan Leisure are no minnows. They own the franchise for Starbucks in Ireland and made the headlines back in 2017 when they spent around €330,000 on the small but landmark hexagonal kiosk in Ballsbridge, Dublin.

A History of ten pin bowling

The two sides have been doing business together since 2016 when KW bought the leisureplex from the receivers of the previous owners Tenderbrook, a company in Richard Barrett and Johnny Ronan’s Treasury Holdings group. KW entered into short-term letting arrangements with Lorgan Leisure, charging annual rent of €220,000 plus vat. The most recent agreement was signed in February 2019 and contained a clause inhibiting the leisureplex operator from seeking a new tenancy.

Last October, KW gave the Stillorgan leisureplex owners three months’ quit notice. Lorgan fired back on December 19th, 2019 with notice of Circuit Court proceedings looking for a new tenancy or alternatively, compensation for disturbance. 

As already stated, landlords KW responded, a week later, with a High Court action over Logan Leisure’s alleged failure to vacate the premises. That case was fast-tracked into the Commercial division of the High Court last January.

At a High Court hearing in February, KW argued delays to the building project were costing it millions. While no contractor has yet been hired for the job, the fund told the court it would be exposed to “very considerable financial loss” if the injunction it sought was not granted.  This assertion was based on the current rate of construction inflation which in early 2020 was running at between 6% and 7%. KW argued that this could lead to cost increases of €400,000 per month on the project or €5 million per year. In his judgment, Justice McDonald said it remains to be seen whether that rate will be affected by the economic consequences of the current Covid 19 outbreak.

Last month, KW pressed for an interlocutory order for immediate possession of the premises – despite the existence of Circuit Court proceedings.

KW, represented by top tier law firm Arthur Cox, claims several grounds exist for such an order. First, it relies on a break option in the short term commercial letting agreement signed with Lorgan last year. It also claims the leisureplex operator has no right to a new tenancy in circumstances where planning permission has been granted to redevelop the site, and where Lorgan has allegedly not been a continuous tenant for 20 years, as required under the Landlord and Tenant (Amendment) Act, 1980. KW also claims that Lorgan agreed to renounce certain rights when it signed up to last year’s commercial letting deal. 

While these claims are hotly disputed by Lorgan Leisure, represented by Eversheds Sutherland, the main issue before the court was the choice of battleground. Landlord and tenant disputes, under the 1980 Act, fall under the jurisdiction of the Circuit Court, not the High Court. KW’s application for a mandatory High Court possession order of the premises was framed by Lorgan as an “ill-conceived attempt to circumvent the entire statutory scheme governing landlord and tenant relations”.

The dilemma for Justice McDonald was in deciding whether the circumstances of the case were exceptional enough, or urgent enough, for the High Court to legitimately muscle in on the Circuit Court’s terrain. This decision was based on affidavit evidence of what had occurred.

A disappointing meeting

The court heard there were meetings and negotiations leading up to the February 2019 commercial let agreement between KW and Lorgan Leisure. 

KW’s intention to develop the leisureplex was no secret. In fact, the parties discussed whether the fund would include plans for a bowling alley in any future development of the site. The court heard that idea was scotched at a meeting on January 24, 2019, between Jason Byers, Head of Residential for KW in Ireland, his colleague Peter McKenna, and Ciaran Butler and Mary Rose O’Shea of Lorgan Leisure.  It was made clear that KW intended to progress their plans without a bowling alley.  According to Byers, Lorgan Leisure was also informed at that time that vacant possession of the property would be sought in order to proceed with the proposed development.

I believe that the belated and unfounded assertion of such an entitlement is calculated to cause financial loss to the Plaintiff.

Jason Byers, KW Investment Funds

On affidavit, Butler said he was disappointed with the news but he kept his feelings more or less to himself. He stressed that he never (either at this meeting or at any other time) gave any assurance that his firm would be prepared to offer up vacant possession of the buildings.

On August 24 2019, KW submitted a planning application to An Bord Pleanala for a strategic housing development on the site and surrounding lands. The plan was to construct 232 “build-to-rent” apartments, two shops and four restaurants or cafes. The apartments would range in height from two to eight stories.  Strategic housing applications are made directly to the planning board in order to speed up the development process.

The leisureplex operators were informed of the move. Lorgan did not lodge a planning objection. Permission was granted by the board in December.

The break clause had already been fired. KW was keen to press on towards demolition. Legal proceedings were soon in train. 

In the High court action, KW made the case that at any time from December 2015, Lorgan could have sought a new tenancy under the 1980 Act. It didn’t. Instead, it claimed that the leisureplex firm “sat back” and allowed KW to expend significant time and expense planning a development. It entered into short term lets with built-in break clauses clearly designed to ensure that the landlord would be in a position to proceed with development works at an early opportunity.  This, it was claimed, did not make sense if they were looking to apply for a new tenancy.

Byers said on affidavit: “Although the Plaintiff had been engaging with the Defendant since 2016, had entered into two short term letting agreements with it, and had kept it informed through 2019 of its redevelopment plans, the Defendant had never previously suggested that it had or could have any entitlement to a new tenancy.  Indeed, in circumstances where the Defendant had executed deeds of renunciation in respect of those short term letting agreements, discussions had at all times proceeded on the basis that the Defendant had no such entitlement.  I believe that the belated and unfounded assertion of such an entitlement is calculated to cause financial loss to the Plaintiff.”

KW argued that if the injunction for vacant possession was not granted, Lorgan Leisure would not be in a position to meet any subsequent claim for damages.  

Lorgan denied this assertion. It maintained it was a substantial business with assets worth over €1.2 million It also made the point that KW is not entitled to damages under the 1980 act which allows a tenant to remain in occupation of a premises while a row over a tenancy is being decided by a court – a point accepted by Justice McDonald.

In respect of the renunciation clause in the letting agreement, Ciaran Butler said the leisureplex only agreed to renounce certain tenancy rights but not its statutory right to claim a new tenancy under Section 13 of the Landlord and Tenant Act 1980. Section 13 can give relief to tenants who show 20 years of consistent occupancy.

He said a High Court order for vacant possession would terminate his business and have a significant knock-on effect for the leisureplex’s 55 employees. 

The jurisdictional dilemma

Stillorgan Leisureplex . Pic. Bryan Meade 19/03/2020

Were the circumstances of KW’s case exceptional enough to warrant an intervention from Justice McDonald when a claim to a new tenancy was pending before the Circuit Court? This, remember, was in circumstances where the Oireachtas expressly set out in the 1980 legislation that landlord and tenant disputes were the preserve of the Circuit Court. If the High Court refused to step in, was there a risk of serious injustice to KW? Or was Lorgan Leisure’s application for a new tenancy so doomed to failure as to justify it being shut down by a higher court at the first hurdle?

For starters, Justice McDonald could not find anything distinguishing about the case put forward by KW. 

His judgment states: “A landlord could make the argument made by the plaintiff in these proceedings that it will suffer uncompensatable loss in the event that immediate possession of the tenement is not delivered up.  In each such case, the landlord would be able to make the case that, the delay in the development works will, in all likelihood, lead to increased costs in the future.  Thus, if the plaintiff is entitled to invoke High Court jurisdiction in the present case, then every landlord with the benefit of planning permission for the re-development of lands incorporating a tenement will likewise be entitled to invoke High Court jurisdiction on the same basis.”

That, he concluded, would represent a significant derogation from what the Oireachtas clearly envisaged when establishing the Circuit Court as the jurisdiction of choice under the 1980 legislation.

That he noted was why the Landlord and Tenant Act had been described as “revolutionary” in terms of contract law, by a High Court judge in the 1980s

Secondly, Justice McDonald was not convinced that Lorgan Leisure had no chance of success in its bid for a renewed tenancy. KW made the argument that Lorgan does not have the benefit of 20 years’ continuous occupation.  The court heard that for the period from December 2006 to December 2010, a company called Vencam was the tenant. The leisureplex operator claims Vencam, like Lorgan Leisure, is a subsidiary of the group, Entertainment Enterprises Trading Ltd (EET).

KW says Vencam doesn’t meet the definition of a subsidiary under company law as Colum and Ciaran Butler were registered as the shareholders in Vencam, rather than EET. The Butlers say the shares were held in trust for EET. 

Justice McDonald found that logical and coherent arguments had been made by both sides. In such circumstances, he could not conclude Lorgan Leisure’s Circuit Court claim had no prospect of success.

Estoppel by convention and representation

KW’s last gambit to the court was that it had relied to its detriment on the unambiguous actions of the Leisureplex operators in signing a renunciation clause, not objecting to planning permission and never mentioning its claim to statutory tenancy rights  – all of which indicated it would vacate the premises when the break option was exercised.

This legal device, designed to stop a person going back on their word, is known as estoppel.

“Were it not for the provisions of the 1980 Act, the plaintiff might well have an unanswerable case to make to this effect,” Justice McDonald concluded. However, the 1980 Act allows a tenant in such circumstances to claim a new tenancy regardless of whether they had agreed to deliver up vacant possession of the property on the expiration of a letting agreement. That, he noted, was why the Landlord and Tenant Act had been described as “revolutionary” in terms of contract law, by a High Court judge in the 1980s.

With that, Justice McDonald refused jurisdiction, leaving the battle to be fought another day, this time before the Circuit Court.