Supermac’s boss Pat McDonagh has been ordered to reimburse more than €150,000 in “overpaid” council rates and rent to the tenants of one of his fast-food outlets.
The order against the well-known Galway businessman was made in the Limerick Circuit Civil Court on Wednesday after it found Mr McDonagh had breached the terms of a long-standing "oral tenancy agreement" with the plaintiffs, John and Mary Lyons, for a Supermac's premises at Ennis Road, Limerick.
The plaintiff’s firm, Watchford Ltd, had also entered into an oral franchise agreement with the defendant’s company Supermac’s Ireland Ltd.
An annual rent of about €132,000 was agreed in March 1995, from which it was also agreed the defendant would discharge rates of about €22,000 to Limerick City Council.
Representing the plaintiffs, Sheila Finn told the court that Mr McDonagh stopped paying the rates for the Supermac’s premises in 2009. This resulted in the plaintiffs, as occupiers, being obliged to pay rates on top of the rent, totalling more than €154,647.
The court heard that a valuer for Mr McDonagh has estimated the current annual rent at about €196,000.
However, a valuer for John and Mary Lyons estimated the annual rent should be €86,000.
Ms Finn said her clients were willing to pay rates going forward. However, she argued they were entitled to “recover” losses after they had “overpaid”.
John Lyons gave evidence that the Supermac's premises was "dilapidated". He claimed the defendant had not upgraded the premises, despite asking him to do so on "numerous" occasions.
David McHugh, for the defendant, said Mr McDonagh had invested significantly in the premises.
“The defendant injected €500,000 into the property in 1995, and there are plans for a further €500,000,” Mr McHugh added.
Ms Lyons, who was present in court, was not called to give evidence.
Having considered two days of evidence, presiding judge Terry O’Sullivan said he was “more inclined” to agree with the plaintiff’s valuation of the rent.
He said the Lyonses’ obligation to pay rates would continue. However, the court ordered the rent be reduced by €7,000 to €125,000.
It ordered Mr McDonagh to reimburse the rates previously paid by the plaintiffs since 2009 by way of annual deductions to the new fixed rent at €125,000.
In light of the reduction of the annual rent, the court ordered Mr McDonagh refund the plaintiffs’ excess of rent of €19,000, paid by them since the proceedings were commenced in 2015.
The reduced rent of €125,000 was backdated to March 2015, with Mr McDonagh ordered to repay the plaintiffs, over the next five years, a total of €154,647 – a figure net of tax for both rebate of rates from 2009 to 2015 of €135,647 plus a rebate of excess rent from 2015 to 2018 of €19,000.
In his summing up, the judge said: “There was clearly an overpayment.”
He said the plaintiffs were “entitled to a rebate”. They were “at a loss” after they “paid the rates”, he added.
Speaking outside the court afterwards, Mr McDonagh said: “That’s part and parcel of business.”
He was “surprised” by the court’s decision to reduce the rent. “Look, at the end of the day [it] doesn’t make an awful lot of difference one way or the other.
“He [Mr Lyons] has done well out of it; we have done fairly well out of it. So, look, that’s just the way it is. The rent has been reduced and he [Mr Lyons] is now liable for the rates going forward. It’s probably an even-enough result, at the end of the day.”
There was no order for costs. Mr McDonagh has 10 days from the judgment date to lodge an appeal.