A bank has been given the green light to take possession of Ambiance Lounge after the Supreme Court ruled that Carlton Simmons, a former Corporation of Hamilton Alderman, had leased the bar to his own company without the lender’s consent.

Puisne Judge Larry Mussenden said the leases for both Ambiance Lounge and Fresh Clips were signed shortly after HSBC Bermuda warned Mr Simmons that they would pursue legal action over his mortgage debts.

In those circumstances, the judge said it was “inconceivable” that he believed he had permission to enter into the new leases.

According to a recent judgment, HSBC Bank of Bermuda Ltd launched legal action against both Mr Simmons and Ambiance Holdings Ltd in 2021 over the two leases.

The Supreme Court heard that Mr Simmons signed a mortgage for a property at 42 Angle Street in 2004, but by 2017 he and the bank had entered negotiations about his level of debt on the mortgage.

On June 15 that year, the bank withdrew a counter-proposal and indicated that they would begin legal proceedings.

However, the next day Mr Simmons granted two leases to Ambiance Holdings Ltd — which he was the sole shareholder — for a ground-level barbershop, Fresh Clips, and the Ambiance Lounge.

The barbershop lease was for 15 years, while the nightclub’s was for 30 years.

The bank obtained a receivership order for the property in 2019, but Ambiance Holdings refused to leave the property and stopped paying rent in April 2021.

As a result, the bank called on the courts to void both leases, order the property be turned over and demand the payment of accrued rental arrears.

While the bank said that the mortgage prohibited Mr Simmons from leasing out the property without their consent, Mr Simmons said he was unaware of that clause and claimed that the bank had not raised any issues about previous leases.

He further argued that the bank had waived the requirement through its own “actions and practices”.

The bank also argued that the timing of the leases was intended to frustrate the bank’s effort to regain control of the property, noting the leases were signed the day after the bank warned that proceedings would be launched.

The bank claimed both leases were unusually long and generous, stating that the Ambiance Lounge lease required $1,600 in monthly rent while a professional valuer determined the appropriate rental sum for the site would be between $2,250 and $2,500.

While the valuer said the $1,000 barbershop lease was above the appropriate level for the property — estimated at about $800 a month — the bank argued the length of the lease and rising costs meant the rate would likely be a “significant discount” by the end of the lease.

The bank further raised concerns about what they said was an “uneconomical and unreasonable” clause in the Ambiance Lounge lease, which said that if a lack of maintenance caused the tenant a lack of fresh water, the landlord would owe the tenant $3,000 per day until fresh water was supplied to the property.

In his written ruling, Mr Justice Mussenden said he believed Mr Simmons was aware of the need to get the bank’s permission before leasing the property and dismissed the suggestion that the bank had waived that clause.

He highlighted the timing of the leases shortly after the bank withdrew their counter proposal.

“In my view, the terms of the 2017 revocation e-mail were pellucid and as Mr Simmons was aware of that e-mail, it would have been obviously pellucid to him that the counter proposal was revoked and it was no longer open to him to accept,” Mr Justice Mussenden said.

“To that point, I reject Mr Simmons’s evidence that based on his prior conduct with officials of the bank he thought that there could be further negotiations. In my view, MJM was clear in the e-mail that it had been instructed to issue proceedings.”

As a result, the judge ruled that the leases were void and ordered the defendants pay the bank $37,966 for occupation of the mortgaged property.

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