Carey Value Added SL v Grupo urvasco SA
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BLAIR,Mr Justice Blair |
| Judgment Date | 23 July 2010 |
| Neutral Citation | [2010] EWHC 1905 (Comm) |
| Docket Number | Claim No: 2009 FOLIO 1692 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 23 July 2010 |
[2010] EWHC 1905 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: MR JUSTICE BLAIR
Claim No: 2009 FOLIO 1692
Mr Robert Miles QC and Mr Andrew de Mestre (instructed by Mayer Brown International LLP) for the Claimant Mr Mark Hapgood QC and Mr Tom Smith (instructed by Hogan Lovells International LLP) for the Defendant
Hearing dates: 2 July 2010
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Blair:
This is an application by the claimant, Carey Value Added, S.L., for summary judgment on its claim under a Deed of Guarantee and Indemnity dated 21 December 2007 by which the defendant, Grupo Urvasco S.A., guaranteed the obligations of its subsidiary, Grupo Hotelero Urvasco S.A., under a Loan Agreement entered into on the same date between Grupo Hotelero Urvasco (as borrower) and Carey (as lender). The loan was in connection with development of a hotel and luxury apartments on the Citibank House site on the Strand, Central London. Carey claims €55,435,526.07 plus accrued interest at 2.5% over the 3-month Euribor rate since the date of the demand under the Deed of Guarantee and Indemnity. Grupo Urvasco submits that Grupo Hotelero Urvasco had the right to rescind a related agreement, following the exercise of which it was no longer liable to repay any part of the loan to Carey. Accordingly, there is no outstanding indebtedness on which the guarantee can bite. Alternatively, it submits that Grupo Hotelero Urvasco has very substantial claims against Carey for breaches of the relevant loan agreement which Grupo Urvasco is entitled to set off against any sums due to Carey. In response, Carey says that the Deed of Guarantee and Indemnity prevents Grupo Urvasco from relying on those defences and that Grupo Urvasco is obliged to pay as a separate, independent obligation by way of demand bond the amounts certified to be due. The very purpose of the material terms, it is submitted, is to enable Carey to recover from Grupo Urvasco without having first to litigate these kinds of defences. As a result, it submits that Grupo Urvasco does not have a reasonable prospect of defending the claim.
The facts are set out in the four witness statements filed by the parties. Although overall the matter is highly contentious, so far as this summary judgment application under the Deed of Guarantee and Indemnity is concerned, the ambit of the factual dispute is relatively limited. Grupo Urvasco and its subsidiary, Grupo Hotelero Urvasco, are Spanish companies. Grupo Hotelero Urvasco is a hotel developer which acquired the site in the Strand that I have mentioned through its own subsidiary, an English company called Urvasco Ltd. Prior to Carey coming on the scene, the development was funded by Banco Bilbao Vizcaya Argentaria, S.A. (“BBVA”) pursuant to a Credit Agreement dated 22 December 2004 to which the three Urvasco companies were parties (Grupo Urvasco as guarantor). However it appeared that the BBVA financing would be insufficient to complete the development, and in about November 2007 Grupo Hotelero Urvasco approached Carey for further finance. As an investment fund rather than a traditional lender, the financing was to be provided by Carey by a sale and lease-back transaction in relation to the hotel.
In implementation of the transaction, the parties entered into the following agreements all dated 21 December 2007:
(1) A Loan Agreement between Grupo Hotelero Urvasco and Carey (then called Losan Hotels World Value Added I, S.L.). Under the Loan Agreement, Carey agreed to advance to Grupo Hotelero Urvasco a loan to a maximum amount of the Euro equivalent of £70,000,000 in various tranches.
(2) A Sale and Purchase Agreement (“SPA”) between Grupo Hotelero Urvasco and Carey in respect of the shares of Urvasco. The SPA provided the sale and leaseback element of the transaction under which, at completion, Carey (through its English nominee company, London Value Added I, Ltd) was to purchase the shares in Urvasco from Grupo Hotelero Urvasco (subject to the latter's right of repurchase seven years later). Carey was entitled to apply any sums due under the Loan Agreement towards the purchase price.
(3) The Deed of Guarantee and Indemnity between Carey and Grupo Urvasco, under which the present claim is brought.
The first two tranches of the loan were €8 million and €33.58 million advanced on 28 December 2007 and 15 January 2008 respectively. In circumstances which are in dispute, further tranches were advanced in the sums of €4,106,798.62 on 2 April 2008, and €3,441,880.59 on 5 May 2008, but none thereafter. By July 2008, the parties were at odds with each other, though there were various proposals to resolve matters. It appears that work on the site ceased on 8 September 2008. On 8 July 2009, BBVA appointed receivers over the property in reliance on events of default under the BBVA Credit Agreement, namely the failure to pay the sums due on 31 December 2008 and 30 June 2009 totalling €29,854,152.62, and the voluntary abandonment of the development of the property for a period longer than 28 days.
The defendant contends that the financial difficulties which Grupo Hotelero Urvasco ran into were caused by Carey's wrongful failure to provide financing for the development works. As it was put by Mr Mark Hapgood QC for Urvasco, Carey cynically and deliberately starved it of cash. Carey strongly denies this. It maintains that it had the funds available to advance, going so far as to place one further tranche into an escrow account. But as it was put by Mr Robert Miles QC for Carey, in its view, Grupo Hotelero Urvasco was pretty much bust. Carey has, it submits, a compelling case that there was a default within the terms of the Loan Agreement and, as a result, it had no obligation to advance further tranches. Among the matters it relies on are (a) material adverse changes in the financial position of each of the Urvasco companies from December 2007 to mid-2008 such that Grupo Urvasco was in negotiations with its creditors, (b) the fact that the development had suffered very substantial delays in the first four months of 2008 and the long stop date for completion of 30 April 2009 would not be met, and (c) the failure to provide required documentation and notice of a claim against Urvasco to the monitoring surveyor, as well as failure to follow the procedure required under the Loan Agreement.
On 9 July 2009, Grupo Hotelero Urvasco issued proceedings in the Commercial Court against Carey and its nominee company claiming declaratory relief in respect of its right to rescind the SPA pursuant to clause 6.17 thereof, and thereby to cancel the indebtedness under the Loan Agreement, and claiming damages in respect of Carey's alleged breaches of the Loan Agreement. I shall have to come back to clause 6.17 of the SPA which has been central to the argument on the summary judgment application. There is an issue about the time of service of these proceedings. Although the nominee's address for service was the same address as that of Carey's solicitors, Mayer Brown, the firm has no record of the proceedings having been received. It is however common ground that Mr Couto of Grupo Urvasco notified Carey on 4 December 2009 that the proceedings had been commenced, but they were not formally served on Carey in Spain until 22 December 2009. I shall refer to them as the “Loan Agreement Proceedings”, and they are presently ongoing in the Commercial Court.
It is not in dispute that about €49m in total was advanced by Carey to Grupo Hotelero Urvasco (leaving aside interest), and nothing has been repaid. Following the receipt of consent from BBVA (which was required by the terms of an Inter-creditor Agreement), by a letter dated 20 November 2009, Carey demanded repayment from Grupo Hotelero Urvasco of all sums outstanding under the Loan Agreement, and made a demand of Grupo Urvasco under the under the Deed of Guarantee and Indemnity, both in the amount of €55,108,702.58. The following month, further demands were made of:
(1) Grupo Hotelero Urvasco by a letter dated 23 December 2009 in which the amount outstanding under the Loan Agreement was certified by Carey as being €55,426,655.61. This was in reliance on clause 11(a) of the Loan Agreement, which provides that Carey's certificate as to any amount payable to Carey by Grupo Hotelero Urvasco under that Agreement is conclusive save to the extent of any manifest error; and
(2) Grupo Urvasco by a letter dated 24 December 2009 in which the amount outstanding under the Deed of Guarantee and Indemnity was certified by Carey as €55,435,526.07. This was in reliance on clause 20.6 of the Deed, which provides that any certification or determination by Carey of a rate or amount under the Deed is, in the absence of manifest error, conclusive evidence of the matters to which it relates. I will come back to this clause, which again has been important in the argument on this application.
On 29 December 2009, a number of significant events occurred, which I shall take in the order of the agreed chronology. By letter of that date, Grupo Hotelero Urvasco rescinded, or purported to rescind, the SPA pursuant to clause 6.17 on the basis that Carey had failed to advance tranches which it was obliged to provide under the Loan Agreement. In the Loan Agreement Proceedings, Carey denies the effectiveness of this purported rescission on a number of grounds including that (a) there was no obligation to advance further tranches under the Loan Agreement...
To continue reading
Request your trial
-
Grupo Hotelero Urvasco SA v Carey Value Added SL
...on the basis that the guarantee was a first demand guarantee and therefore payable without regard to the underlying contract (see [2011] 1 B.C.L.C. 352). As already indicated, it is not now in dispute that GU's liability under the guarantee is coterminous with that of GHU. 13 The summary ju......
-
Wuhan Guoyu Logistics Group Company Ltd v Emporiki Bank of Greece SA
... ... That exercise is not without value subject to the caveat (i) that the answer to the question ... mean that the instrument is not a guarantee: Carey Value Added v Group Urvasco [2011] 2 AER (Comm) 149 ... ...
-
Stemcor UK Ltd v Global Steel Holdings Ltd and Another
...arguable set off "it seems to me that the guarantor is entitled to rely on the alleged set off as well". (4) More recently in Carey Value Added v. Grupo Urvasco [2010] EWHC 1905 (Comm) Blair J stated at [17]: "It is not in dispute that unless the right is expressly excluded, a guarantor can......
-
North Shore Ventures Ltd v Anstead Holdings Inc. and Others
...approximating a performance bond; see, by way of contrast, the decisions on such questions of construction of Blair J in Carey Value Added SL v Gruppo Urvasco [2010] EWHC 1905 and Sir William Blackburne in Vossloh A.G v Alpha Trains (UK) Ltd [2010] EWHC 48 The second step must be to ascerta......
-
Case Law Update 2011 - Issue 2
...Waters, Bristows on RBS v Hicks & Gillett. Guarantee distinguished from on demand bond Carey Value Added SL v Grupo Urvasco SA [2010] 132 Con LR 15 Commercial As part of a property development transaction, the defendant Grupo Urvasco, entered into a deed of guarantee and indemnity. Part......
-
Bonds And Guarantees: An Update
...to establish liability in respect of the sum due before making a call on the bond. 2.3 In Carey Value Added, S.L.B Groupo Urvasco SA [2010] EWHC 1905 (Comm) the High Court had to consider whether a security document was truly an on demand bond or a secondary guarantee obligation. The expres......
-
Security for performance
...LLC v Mongolia Energy Corporation Ltd [2015] hKCFI 1781 at [45]–[46], per Bharwaney J. 192 Carey Value Added SL v Grupo Urvasco SA (2010) 132 Con Lr 15 at 26 [24], per Blair J. 193 Under the English Civil procedure rules, summary judgment will be entered where, among other things, the defen......