A company and three men who agreed to take over the Pod nightclub in Dublin acted in bad faith when they delayed the signing of the lease with owner John Reynolds, the Commercial Court has ruled.

Altomoravia Ltd, and the three who acted as guarantors for the lease, “engaged in an entirely unscrupulous attempt” to gain extra concessions in relation to the construction works at the Harcourt Street club before they would sign, Mr Justice Brian Cregan said.

He ruled Mr Reynolds was entitled to have the lease contract rescinded along with damages for misrepresentation which will be decided later.

Mr Reynolds sued Altomoravia and guarantors Thomas Anderson, Colin Dolan and Michael Ormond, arising out of the failure to execute a settlement over a lease agreement first made in April 2012.

Previously sued

Altomoravia and the three men had previously sued Mr Reynolds seeking that he complete the April 2012 lease. That case was settled on the basis that all parties would execute the lease by the end of March, 2014.

Subsequently however, further difficulties arose and it was not executed, with Mr Reynolds then bringing his proceedings.

Mr Justice Cregan, finding in favour of Mr Reynolds, said the defendants found out after the March 2014 settlement it would cost €750,000 to put right water damage to the building.

They clearly had not factored this into their negotiations for the settlement, the judge said.

They had perhaps made “a bad bargain” and sought to impose an extra condition before signing so that Mr Reynolds would pay for the works.

The court heard Mr Reynolds bought part of the Pod premises in 1993 and by 1998 owned it entirely.

He was “caught in the economic downturn” in 2008 and with borrowings of €10 million from AIB, the bank appointed a receiver to Pod Entertainment Ltd which owned the lease.

Altomoravia and the three men then agreed to take over the lease in April 2012.

Difficulties arose in relation to a fire exit which needed the permission of an adjoining property owner for its use.

Fire safety works

When the neighbour was not prepared to continue the arrangement which Mr Reynolds had enjoyed, the defendants sought planning permission, without notifying Mr Reynolds, for alternative works to meet fire safety requirements.

Mr Justice Cregan said Mr Reynolds objected, as he was concerned the proposed works would diminish the value of the grade-one listed property.

In the March 2014 settlement, the latter agreed to withdraw any objections to the fire safety permission application.

Mr Justice Cregan said that the defendants then unilaterally postponed the closing date – March 26th, 2014 – for the execution of the lease.

The judge said they refused to close until the new conditions were agreed and delayed “in order to put pressure” on Mr Reynolds who they knew was in financial difficulties.

They forced Mr Reynolds to issue proceedings because of this behaviour.

The defendants, in a new application, separately sought specific performance of the March 2014 court settlement against Mr Reynolds. They routed deposit monies “through a murky and unexplained route” and filed misleading statements to court, Mr Justice Cregan said.

He refused the defendants’ application for specific performance and set aside the March 2014 settlement on grounds of the defendants’ breach of the essential condition that it be executed by March 26th, 2014.