Court orders penalties case over Paceville lease dispute to proceed after confirming contract termination

The Court of Appeal has cleared the way for a claim concerning contractual penalties to proceed in relation to a long-running commercial lease dispute over a former entertainment venue in Paceville, after confirming that the lease had been validly terminated.

The case concerns Saint George’s Park Company Limited, as lessor, and Footloose Catering Limited, the lessee of a property in St George’s Road formerly known as Sinners in Heaven. The lease was governed by a public deed dated 19 July 1989, with Wayne Chetcuti and the late Hugo Chetcuti acting as guarantors. In later proceedings, Luke Chetcuti and Calfen Limited also appeared as defendants.

In earlier litigation decided in October 2017, the Civil Court had upheld the lessor’s claim to dissolve the lease, ruling that Footloose Catering had carried out alterations to the façade and structural works inside the premises without the lessor’s written consent, and had failed to remedy the breach within the time allowed following formal notice. The court ordered the company’s ejectment from the premises.

That judgment was appealed, and the matter remained pending until the Court of Appeal confirmed the termination on Tuesday.

A separate set of proceedings, filed in 2018, sought to enforce a clause in the contract that imposed a daily penalty for any delay in returning the premises once the lease had been terminated. The clause provided for a penalty of LM200 (equivalent to €465.88) per day for each day the keys were not handed over or where the lessor was obstructed from taking material possession. The penalties were calculated to have accrued from 23 August 2005, with the amount claimed in the current action capped at €500,000.

However, the First Hall of the Civil Court had rejected the penalties claim in June 2020 on the grounds that it was premature, holding that no penalties could be enforced until the termination of the lease had been definitively settled on appeal.

The Court of Appeal has now overturned that finding, noting that with the lease termination confirmed, the objection of untimeliness no longer applies. As a result, the court annulled the earlier judgment and remitted the penalties claim to the Civil Court, First Hall, to be determined on its merits, including the extent of any sums due and the applicability of the penalty clause in practice.

The claim will now return before the lower court for a full evaluation.