The High Court has ruled that two prospective restaurant operators were not entitled to recover a €25,000 deposit after their proposed purchase of a leasehold premises in Dalkey fell through.
Gerard Cregan and Joseph Gray had agreed to buy the leasehold at 22 Castle Street from Taviri Limited for €245,000. The contract was signed in August 2006, after a delay over planning documentation. Completion also required the landlord’s consent to the assignment of the lease.
The landlord agreed to the assignment on condition that one of Taviri’s existing guarantors remain liable for the new lessees’ obligations under the lease. The proposed purchasers and their nominated company were also to provide guarantees and indemnities. The judge accepted evidence that this arrangement was unusual, though one solicitor had encountered it once before.
On 26 September 2006, the purchasers’ solicitor told the vendor’s solicitor that the purchasers no longer wished to proceed because of the “onerous covenants” sought by the landlord, and asked for the deposit to be returned. Taviri’s solicitor responded that the landlord’s consent had issued subject to the guarantees and that the condition was standard practice. A notice making time of the essence was then served. The sale did not complete, and the deposit was forfeited.
In his judgment delivered on 30 May 2008, Mr Justice Charleton held that the requirement for an existing guarantor to remain in place was reasonable and could have been anticipated from the lease and the circumstances of the transaction. He considered the parties’ bargain objectively and said he could not substitute a general assessment of fairness for the contractual terms.
The court concluded that there was no basis to interfere with the contract’s forfeiture provision. The judgment therefore left the deposit forfeited. It did not order a sale to complete or determine any broader issue beyond the deposit dispute before it.