Bruce Mackay and Another (Claimants Respondents) v Ashwood Enterprises Ltd and Others (Defendants Appellants) (4) Noel McFeely and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lord Justice Jackson,Lord Justice Ryder |
| Judgment Date | 31 July 2013 |
| Neutral Citation | [2013] EWCA Civ 959 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case Nos: A3/2012/3266 and 3267 |
| Date | 31 July 2013 |
[2013] EWCA Civ 959
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR JUSTICE PETER SMITH
[2012] EWHC 3637 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lloyd
Lord Justice Jackson
and
Lord Justice Ryder
Case Nos: A3/2012/3266 and 3267
Hugo Page Q.C. (instructed by St John Law Limited) for the Appellants
Anthony Trace Q.C. and Rosanna Foskett (instructed by Dentons UKMEA LLP) for the Respondents
Introduction and summary
This judgment is given on two linked appeals. One appeal is against an order of Mr Justice Peter Smith made on 29 June 2012, on a without notice application by the claimants. The other appeal is against the same judge's order dated 22 November 2012, on the application of the defendant appellants whereby he refused to set aside his earlier order.
The judge's order dated 29 June 2012 (which I will call the First Order) covered various matters, including injunctive relief and service of the proceedings (the first defendant is a company incorporated in the Isle of Man), but the only provision in the order which is at issue on the appeal is that which requires the defendants to pay the claimants' costs of and occasioned by the application, the amount of which was to be (and later was) assessed summarily by the judge. The judge had made another order (which I will call the Receivership Order) on the same day, appointing the claimants as receivers, in circumstances to which I will refer, and thereby conferring on the claimants the standing which they used to commence the proceedings in anticipation of which the First Order was made. By the first appeal, number 3266, the appellants seek to set aside the paragraph as to costs in the First Order, and to have it replaced by a provision either that there be no order for costs, or that costs be reserved.
The order dated 22 November 2012 (which I will call the Second Order) dismissed an application made by the first to fifth defendants, issued on 29 October 2012, to have the costs provision in the First Order set aside, and replaced by an order reserving the costs of the application to the trial judge. On that occasion the judge gave an extempore judgment, the reference to which is [2012] EWHC 3637 (Ch). He refused permission to appeal, but permission to appeal was given by Sir Stanley Burnton on a consideration of the papers, both for an appeal against the Second Order (which is appeal 3267) and, in case it were needed, against the First Order, with an extension of time for that appeal.
The appeals are brought by the first three defendants only. They are represented by Mr Hugo Page Q.C., as they had been below on the hearing which led to the Second Order and a number of other hearings, though not, of course, the hearing of the without notice applications on 28 and 29 June 2012. The claimants are represented by Mr Anthony Trace Q.C. and Miss Rosanna Foskett, as they had been (by one or other or both of them) at all hearings below. At the end of his judgment given on 22 November 2012 the judge thanked Counsel for their cogent and robust submissions. I am pleased to be able to express the same thanks for the submissions (written and oral) addressed to us on the appeals.
Mr Page argues that the provision in the First Order that the defendants do pay the claimants' costs of the application is an order as to which either the court had no jurisdiction to make it at all, at a hearing notice of which had not been given to the defendants, or if there was jurisdiction, that it could not properly be exercised at such a hearing so as to make such an order. It is, at first sight, a striking proposition that defendants should be ordered to pay such costs, notice of the hearing at which it was made having been withheld from them.
For the reasons set out below, in my judgment the judge had power to make the First Order, and he exercised that power in a proper manner so as not to be open to challenge on appeal. He was also justified in refusing to set the First Order aside. I would therefore dismiss both appeals.
The background to the proceedings
In order to understand the circumstances in which the First Order was made, it is necessary to be aware of the relevant history, which was explained in the evidence put before the judge on the applications in June 2012 on which he made first the Receivership Order and then the First Order. I will set this out in summary form.
The second and third defendants (together, the McFeely brothers) are the registered proprietors of freehold property at 160–188 High Street Stratford London E15 (the Property), which they hold on trust for the first defendant (Ashwood). The Property is close to Stratford International Station and the Westfield Stratford Shopping Centre, and to the site of the Olympic Games held in London in 2012. Several blocks of mixed residential and commercial use have been developed on the land. The development was carried out by a company incorporated in Northern Ireland, Inis Developments Ltd (Inis). In order to finance the development work, Inis entered into a facility agreement with the Bank of Ireland (the Bank). The indebtedness under this was secured by a legal charge (the Charge) of the Property granted by the second and third defendants, with the consent of the first defendant, dated 26 June 2007 and duly registered.
The second defendant purported (on behalf of Ashwood) to grant a lease of residential parts of one of the blocks within the Property, Athena Court, in favour of a company called Filtons Leasing (London) Ltd (Filtons Leasing), dated 31 October 2010. In proceedings to which I will refer as the Filtons claim, Mr Justice Peter Smith declared on 24 May 2012 that this lease was a sham and of no effect: see his judgment at [2012] EWHC 1395 (Ch).
On 4 November 2011 the Bank demanded payment from Inis of sums in excess of £49 million. Shortly thereafter the Bank claimed the same sum from the McFeely brothers under the Charge. Neither demand was satisfied. The Bank then appointed receivers under the Charge and under the Law of Property Act 1925. Originally the persons appointed as receivers were partners in BDO LLP. They were later replaced by partners in Baker Tilly: Mr Graham Bushby, Mr Bruce Mackay, Mr George Maloney and Mr Matthew Haw. I will refer to these as the LPA receivers (including in that label, where relevant, their predecessors who acted at first). The McFeely brothers and Ashwood deny that the LPA receivers were validly appointed.
The LPA receivers experienced serious difficulties in carrying out their role as receivers in relation to the property comprised in the Charge. Thus, acting under the purported lease to Filtons Leasing, Filtons Ltd (Filtons) had let residential units in Athena Court to individual occupiers, and it purported to control the common parts as well. The LPA receivers started the Filtons claim against Filtons and Filtons Leasing. On 14 March 2012 in those proceedings the LPA receivers obtained an order by way of interim relief from Mr Justice Warren, on an application notice dated 8 March, of which notice had been given to Filtons and Filtons Leasing. This was later continued and extended by His Honour Judge Mackie Q.C., who also ordered an expedited trial. That trial came on before Mr Justice Peter Smith over four days from 23 to 26 April 2012. It was upon that claim that the judge gave the judgment to which I have referred on 24 May 2012 declaring (among other things) that the purported lease to Filtons Leasing was of no effect, being a sham. In the course of the proceedings it had transpired that on 13 March 2012, the day before the hearing of the application before Warren J, Filtons had paid £120,000 to the second defendant, something which Filtons would have been prohibited from doing if the order made the next day by Warren J had already been in force. The judge held that the real agreement between the second defendant and Filtons was a managing agency agreement under which Filtons never had any proprietary interest in Athena Court, but which entitled them to a 5% commission. He held that this had been terminated and that Filtons were accountable to the LPA receivers for any money received from occupiers of any part of the Property from 4 November 2011 onwards.
In the meantime the LPA receivers became aware that two other companies called Sector One Properties Ltd (Sector One) and Stratford City Residential Ltd (SCR) were advertising the letting of flats in Athena Court, holding themselves out as able to grant sub-tenancies or licences of such flats, and granting some purported lettings. Accordingly the LPA receivers commenced new proceedings against Sector One and SCR in May 2012 (the Sector One claim). In those proceedings they issued an application for interim relief which came before Peter Smith J on 11 May 2012. A Mr Stone, on behalf of both Sector One and SCR, provided a statement on behalf of the defendants to those proceedings, despite which the judge was satisfied that the LPA receivers were entitled to the relief claimed. He made orders against Mr Stone as regards the supply of information. Mr Stone's answers showed that his dealings with the Property were conducted on the basis of instructions or...
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