High Court of Ireland Decisions

1. The background facts to this matter are that by indenture of lease dated 31 December, 1973, between Anna Keogh, now unfortunately deceased, as landlord and Michael Fenlon as tenant the landlord let to the tenant premises consisting of what is described in the lease as a large hay-barn with a tarmacadam forecourt and market garden adjoining the said hay-barn, forming a portion of the premises known as Waterpark House, Poddle Park, Kimmage in the City of Dublin.

There was the usual obligation on the part of the tenant that if the premises, or any additional buildings or any part thereof, should at any time during the term of the lease be destroyed or damaged by fire the monies received from the fire insurance cover should be expended in repairing and reinstating the demised premises to the satisfaction of the landlord, or the landlord's agents.

It appears that there was a very cordial relationship between Mr Fenlon and Mrs Keogh over the years. He took over this hay-barn and made many improvements to it, I am satisfied. There were few electric lights in it and it had a gravel floor, perhaps some concreting, and there was no plumbing. He put in a concrete base, he rewired the whole place, he installed plumbing and he improved the tarmacadaming of the forecourt.

Then, in 1990, there was a fire and the premises were totally destroyed. Mr Fenlon's business was that of a car repairer and he had certain dealings in relation to the buying and selling of cars and so forth in the actual place where the building had been. Obviously, it was hard for him to carry on his business after the building was destroyed. However, he set about to reconstruct the place. His original intention was to restore the building more or less as it was. He ran into difficulty with the planning authority in getting approval for it. Then he gradually came around to the idea of erecting a more grandiose building (a photograph of which I have seen) and which is what one would call a custom built garage. Attached to that is a building that looks more like a dwellinghouse than a workshop, but it has office accommodation on the top floor. It blends very well into the environment and Mr Fenlon did this by direct labour and I am satisfied that he has done a very good job.

As regards what it cost, he has estimated that he spent in or about £80,000. I think that is correct, and there may be something more to be spent in regard to fencing and tarmacadaming and so forth. He is probably going to be looking at a total outlay of in or around £90,000. I am satisfied that he is a perfectly truthful witness; he has been very frank and open in his evidence. He has not concealed anything and I have been very impressed with him.

I have been impressed, too, with the relationship that he had with Mrs Keogh. He did consult her at all stages and kept her informed as to what he was about to do. She would have been advised by her solicitor largely. I am sure that the solicitor explained to her, and wanted to make clear to the other side as well, that she would be anxious to have the terms of the lease observed: which was to have the building that had been burned down reinstated. As I say, it has been reinstated on a much more grandiose scale than the old hay-barn and on a different site, but of course on the take demise. I have no doubt that all has been done with the approval of the landlord.

The question that has been presented in a very net form for me, with the able and diligent assistance of counsel on each side, is a consideration of whether we have a situation where Mr Fenlon is entitled to a reversionary lease.

It is agreed that he comes within s 30(2) of the Landlord and Tenant (Amendment), 1980. We have to find out then, by reference to s 9 of the Landlord and Tenant (Ground Rents)(No 2) Act, 1978, whether those conditions have been complied with. They are:-

(a) that there are permanent buildings on the land and that the portion of the land not covered by those buildings is subsidiary and ancillary to them;

-- I am satisfied that is so;

(b) that the permanent buildings are not an improvement within the meaning of subsection (2);

-- I am satisfied of that as well;

(c) that the permanent buildings were not erected in contravention of a covenant in the lease;

-- I am satisfied about that, and

(d) one of the alternative conditions set out in s 10 must be satisfied

-- and I think it is agreed by counsel that Mr Fenlon comes within condition number 1:-

1. that the permanent buildings were erected by the person who at the time of their erection was entitled to the lessee's interest under the lease or were erected in pursuance of an agreement for the grant of the lease upon the erection of the permanent buildings;

But here is the rub: it is contained in s 9(4) of the Landlord and Tenant (Ground Rents)(No 2) Act, 1978, which provides as follows:-

Permanent buildings erected by a lessee in pursuance of a covenant in his lease to reinstate the buildings comprised in the lease in the event of their destruction by fire or otherwise shall be deemed to have been erected by the person who erected the original buildings.

Now there is no doubt that Mr Fenlon had an obligation to reinstate the building that had been comprised in the original lease. That is what he set out to do and he was frustrated to a degree by the planning system. So with the agreement of everyone he puts there a much better building. Mrs Keogh, and her solicitor I am sure, were delighted that there should be a better building. The hay-barn was not going to be any loss from that point of view.

On the other hand what is Mr Fenlon's situation? I have come to the conclusion that he had an obligation under the lease to reinstate the building and that in a sense there was no way out for him and what he did was a form of reinstatement. I think some support has to be got from that concept in the one case that was cited to me: Keating v Carolin [1968] IR 193. Chief Justice O Dalaigh recounts in that case at p 200:-"The term 'reinstate,' it is said, is a wide term. The lessee rebuilt and, though the new building was not identical with the old one, what was done was done pursuant to the covenant and it was open to the lessor and lessee to agree as to the manner in which the lessee might discharge his obligations under the covenant. 'In pursuance of,' it is submitted, does not mean 'in accordance with' but means 'because of.' The lessee's answer to this is that the buildings were not erected pursuant to the covenant in the lease of 1904 but in pursuance of an arrangement reached between the parties in 1918. Reinstatement, it is said, involves keeping the premises as a single entity, but here the lessors, it is said, agreed with the lessee that a completely different premises should be put up."

The learned Chief Justice then goes into the particular facts of the case, which need not detain us now.

This case is somewhat the same. There is no doubt that the new premises are completely different to the old. Yet, the building has been erected in pursuance of the tenant's obligation to provide at least as good a building under the tends of the lease. I am satisfied that that is what the parties achieved and that the correct legal result is to hold that in all the circumstances s 9(4) of the 1978 Act does apply. The building is deemed to be the property of the lessor. This means that Mr Fenlon will not be entitled to a reversionary lease but he will be entitled to an ordinary renewal of his lease which is a 35 year lease.

I want to put it on record that I hold that he did spend, or is about to spend, not less than £80,000 and probably nearer to £90,000 on the building, iewith the additional works that he proposes. However, I do not accept that he could have put up much of a building for the estimate he got at £18,000 to replace the hay-barn. As a person who lives in the real world, to some degree, I know that it would simply not be possible to get anything done nowadays for £18,000 in the way of any form of substantial building. If a replacement of the hay-barn had been a viable proposition I think more realistically it would have cost £30,000 to £40,000. I hold that certainly he has improved this site to a figure in the region of £40,000 to £50,000. What help that will be to anyone in estimating the rent, I do not know.