A High Court judge today said it was "nothing short of astonishing" that a valuable State asset such as the National Aquatic Centre at Abbotstown in Dublin, was leased to a company with a share capital of €127 and, according to accounts to the end of 2003, no fixed assets.
Mr Justice Peter Kelly said the €62 million centre was leased to Dublin Waterworld Limited (DWL) "with entirely predictable results".
DWL, with registered offices in Tralee, Co Kerry, had paid no rent since acquiring the 30-year lease in April 2003 and there was a dispute whether it owed a further €10 million in VAT.
There was also alleged breach of the lease requirements to produce audited accounts, regarding management of the centre and to contribute to a "sinking fund" regarding repair and maintenance of the centre.
It was further alleged that admission prices were increased without the consent of Campus and Stadium Ireland Development Limited (CSIDL, which awarded the lease to DWL.
The judge said the shareholding in CSIDL was held by the Taoiseach (25 per cent), Minister for Finance (25 per cent) and Minister for Arts, Sport and Tourism (50 per cent).
While the lease was competently drafted and comprehensive, this was of little benefit if the tenant was not an entity of substance, he remarked.
He made the comments when ruling on an application by DWL to stay proceedings brought against it by CSIDL seeking possession of the centre for alleged breaches of the lease, for the purpose of remitting certain matters to arbitration.
The judge directed the CSIDL proceedings could proceed in relation to its claim of breaches of the lease regarding rent, management of the centre and other issues.
However, he remitted for determination by an arbitrator, Mr Dermot O’Brien, the issue of whether €10 million was due in VAT and also remitted, for determination by architect Peter Keane, issues between the companies regarding repair and maintenance of the premises.
He also made further directions aimed at securing a speedy hearing of the CSIDL claim insofar as it related to the items not referred to the arbitrator and Mr Keane.
Given the number of admitted and alleged breaches of the lease and the description by the ceo of CSIDL of the centre as a facility of national and international importance, the judge said it was not surprising that CSIDL had taken proceedings against DWL. What was surprising was the length of time it took CSIDL to initiate those.
In April 2005, CSIDL had served a notice for possession of the centre premises at which time DWL had admittedly not paid a cent in rent.
The delay in taking court action was not due to any fault by lawyers, who had acted efficiently once they secured instructions, the judge remarked. It was only in the course of court proceedings yesterday that he was told €760,000 had been transferred by Anglo Irish Bank Corporation to the account of CSIDL on foot of a guarantee entered into by DWL, as a condition of its lease, of security for monies due to CSIDL, the judge added.
However, this security was "entirely inadequate" and left some €240,000 due and owing in rent and no proposals as to how that would be paid, he said. It also left CSIDL without security. He also noted DWL had paid one year’s rent insurance of €67,000.
Mr Hugh O’Neill SC, for DWL, said he had been told rent and insurance premiums would be paid by the end of this month. He could not give an undertaking to that effect but understood the monies would be paid and matters would be up to date.
The judge rejected arguments by DWL that problems it had experienced regarding the running of the centre could be explained by the roof of the centre being blown off in the course of a storm in 2005.
He said the failure to pay rent predated this. Mr Denis McDonald SC, for CSIDL, commented that DWL had received some €1 million in "business interruption" funding following the roof incident.
In its claim, CSIDL claims DWL has forfeited its interest in the lease because of several breaches of the lease, has failed to deliver up possession of the centre at Abbotstown and is in wrongful occupation of the centre.
It says the lease was subject to payment of rent and other conditions which, it claims, have not been met. The lease required payment of rent of some €127,000 a year plus ten per cent of the profits of the tenant and also required delivery of audited accounts within 90 days of the end of 2003 and the end of 2004.
DWL has argued that many of its problems arose after the roof of the centre was blown off and claimed repair work since had disclosed design and construction faults with the roof and other parts of the centre.
The centre had been closed since January and this severely curtailed DWL’s earning capacity. In an affidavit, Mr John Moriarty of DWL said it had suffered losses as a result of defects in the building and this would be the subject of future proceedings.
DWL had accepted before the judge that no rent had been paid and that no proposals had been advanced as to how it would be paid, other than calling in the Bank guarantee. It said €67,000 had been paid in one year’s rent insurance. It agreed that the Bank guarantee being acted upon would leave CSIDL devoid of any guarantee regarding future payments of rent.
