The High Court has made an order for possession of the €62 million National Aquatic Centre because of "wilful" breaches of the lease for operation of the centre by Dublin Waterworld Ltd (DWL) and Limerick businessman Pat Mulcair, including failure to pay more than €11 million due in rent and VAT.
Because of those breaches and the breakdown of trust between Dublin Waterworld Ltd and Campus & Stadium Ireland Development Ltd, the State company which owns the centre, Mr Justice Paul Gilligan yesterday declared that the 30-year lease, granted to DWL in controversial circumstances only three years ago, is forfeit.
He ordered that the National Aquatic Centre at Abbotstown, Dublin, be possessed by Campus & Stadium and noted that the State company said it has "contingency plans" for the centre in the event of such an order being made.
DWL secured the lease from Campus Stadium on April 30th, 2003. The judge found that, in a deal done "behind the back" of Campus Stadium just hours earlier that same day, DWL breached the terms of the lease by assigning beneficial ownership of it to Mr Mulcair, who in turn entered into a management agreement with Dublin Waterworld Management Limited (DWML) - a wholly owned subsidiary of Dublin Waterworld Ltd - whereby DWML would manage the centre on Mr Mulcair's behalf.
John Moriarty, a director of DWL, told the court the funding arrangements with Mr Mulcair were a "tax-driven deal". The judge noted the arrangements could be terminated if substantial capital allowances, worth some €2.8 million a year and capped at €34 million, were not secured by Mr Mulcair. This would have left DWL, a shelf company with no assets, without a venture capital provider for the centre.
DWL orally assigned its right to the lease of the aquatic centre to Mr Mulcair on April 30th, 2003 but, instead of Mr Mulcair taking the lease, an "elaborate set" of agreements were put together to protect Mr Mulcair's claim for capital allowances, the judge found. This breached DWL's obligation to itself operate the centre and not to assign its interest without the written consent of Campus Stadium.
He also said Rohcon, which built the aquatic centre had made available some €1.25 million to DWL to be put towards rent payments to Campus Stadium, establishment of a sinking fund and other obligations under the lease.
However, Dublin Waterworld Ltd did not comply with these arrangements. They had received several demands for payment of annual rent of €100,000 as it fell due but made no response until legal action was taken.
The judge found Dublin Waterworld and Mr Moriarty had taken a "conscious decision" not to honour its financial obligations under the lease.
The failure to pay rent and provide audited accounts on time was "wilful", he ruled. Campus Stadium needed audited accounts to calculate what money it was due from DWL relating to Campus Stadium's entitlement to 10 per cent of the annual profits earned by the centre. (Dublin Waterworld Ltd later argued no profits were made).
Mr Mulcair, the judge said, was effectively in the same position as Dublin Waterworld Ltd as regards each breach of the lease as he had effectively taken on the terms, conditions and covenants set out in the lease.
In March 2005, Campus Stadium served a notice for forfeiture of the lease on grounds of multiple breaches of its terms and High Court proceedings were brought.
The State company alleged more than €11 million was due in unpaid rent and VAT and that it had only learned the full details of Mr Mulcair's involvement in the aquatic centre in July 2005.
The judge said he was satisfied that, in February 2002, there was pressure on the State company to get the project agreement for the pool signed. He was satisfied Mr Moriarty had generally advised Paddy Teahon, then of Campus Stadium, that month that Dublin Waterworld would employ the services of another entity to assist in managing the centre and that Mr Teahon had indicated such a course of action would be acceptable provided the centre was well run. However, he rejected Dublin Waterworld's claim that Mr Teahon sought a "fudge" regarding a guarantee to be paid by Dublin Waterworld Ltd. It was clear the guarantee had been discussed at Cabinet level and was an essential condition for Dublin Waterworld staying involved with the pool project, he said.
In his 115-page judgment yesterday, Mr Justice Gilligan said Dublin Waterworld Ltd, with registered offices at Ballyard, Tralee, and with no income or assets, had as directors in February 2001 Mr Moriarty, Kieran Rutledge and Liam Bohan. It got involved in the aquatic centre project after Waterworld UK, a firm which successfully tendered for the contract with Rohcon, had difficulties raising funds and pulled out.
The judge said that while public disquiet about Dublin Waterworld becoming involved in the project played no part in his judgment, such misgivings should have put Dublin Waterworld on notice they should have "at least honoured their basic obligations" in a lease related to a premises built with taxpayers' money and costing more than €60 million.
