CFC 26 Ltd SHG-SH20 Ltd (Proposed Claimant) v Brown Shipley & Company Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Newey |
| Judgment Date | 29 November 2016 |
| Neutral Citation | [2016] EWHC 3048 (Ch) |
| Docket Number | Case No: HC-2016-000617 |
| Court | Chancery Division |
| Date | 29 November 2016 |
[2016] EWHC 3048 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Rolls Building, Royal Courts of Justice
7 Rolls Buildings, Fetter Lane
London, EC4A 1NL
Mr Justice Newey
Case No: HC-2016-000617
and
Mr Hugo Page QC and Mr Adam Chichester-Clark (instructed by Gordon Dadds LLP) for the Claimant and Proposed Claimant
Mr Christopher Boardman (instructed by DWF LLP) for the First and Second Defendants
Mr Tony Beswetherick (instructed by Pinsent Masons LLP) for the Third and Fourth Defendants
Mr Andrew Warnock QC (instructed by Clyde & Co LLP) for the Fifth Defendant
Hearing dates: 13–14 October 2016
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.
This case arises out of the sale of an underlease ("the Underlease") of Sofia House, 204 Great Portland Street, London W1W 5NP ("Sofia House"). In broad terms, the Underlease is said to have been sold for very much less than its full market value as a result of a "corrupt agreement" between four of the defendants and negligence and/or negligent misstatement and malicious prosecution on the part of the fifth. The defendants, however, seek to have the proceedings dismissed summarily or struck out (as well as other relief in the alternative).
Narrative
Before the events relevant to the proceedings, Sofia House was the subject of a long lease (999 years from 6 July 1916) held by the third and fourth defendants, respectively Concord W1 204 GPS Limited and Concord 204 GPS Limited (together, "Concord"), and the Underlease (for 125 years from 12 December 1985). It had also been the subject of a grant of planning permission for redevelopment dated 31 August 2006.
Just short of three years later, in a letter dated 27 August 2009, a Mr Ryan Fitzgerald expressed the view that works at Sofia House had commenced. Mr Fitzgerald is described in the particulars of claim as the "Building Control Surveyor" of the fifth defendant, Westminster City Council ("the Council"). The Council's defence speaks of Mr Fitzgerald having been employed by Shore Engineering Limited.
In the following year, in an email of 12 August 2010, a Ms Kirsten Chohan, a solicitor employed by the Council, said that she accepted that development at Sofia House had begun within the statutory period. According to the Council, however, Ms Chohan's email did not amount to a Certificate of Lawfulness of Existing Use or Development (or "CLEUD") within the meaning of the Town and Country Planning Act 1990 and had no formal or binding status.
On 20 August 2012, the Underlease was acquired by SHG-SH20 Limited ("SHG"), which had been incorporated for the purpose of buying and developing the property. In August 2012 and January 2013, SHG entered into loan facilities with KBL European Private Bankers SA ("KBL", which has been treated as the second defendant), and a subsidiary of KBL, Brown Shipley & Co Limited ("Brown Shipley"), which is the first defendant. Mr Din Hessam ("Sam") Yeganeh ("Mr Yeganeh"), who is the ultimate beneficial owner of SHG, guaranteed at least some of the lending.
On 3 June 2013, the Council presented a winding-up petition against SHG based on alleged non-payment of business rates in the sum of £177,953.86. On 18 July, the Council served an enforcement notice for the removal of hoardings outside Sofia House. According to the particulars of claim, the notice stated:
"It would appear that there are no current or imminent works on site which have the benefit of planning permission."
SHG does not appear to have exercised its right to appeal the notice.
On 2 October 2013, Concord forfeited the Underlease and brought possession proceedings. Later that month, KBL and Brown Shipley (together, "the Banks") served demands on both SHG and Mr Yeganeh. Brown Shipley also, on 25 October, appointed two individuals from Colliers International, Mr Ross Freese and Mr Jonathan Cookson ("the Receivers"), as Law of Property Act 1925 receivers.
In February 2014, the Receivers agreed a consent order to secure relief from forfeiture and dispose of the possession proceedings. The winding-up petition against SHG had already been dismissed, in December 2013, following a payment into Court pending resolution of planning and rating disputes.
SHG apparently submitted an application for a CLEUD during 2014. The particulars of claim say this on the subject:
"on 3 rd June 2014 SHG submitted an application for a … CLEUD …, relying upon implementation of the 2006 planning permission. The CLEUD was eventually granted by the Council on 23 rd January 2015 …."
In June 2014, the Receivers placed Sofia House on the market. On 7 October, the Receivers informed Concord and Longridge Developments Limited ("Longridge"), each of which had expressed interest in buying Sofia House, that they were imposing a deadline of 12 noon on 13 October for confirmation that they were ready to exchange contracts. The letter stated that the Receivers would exchange with whichever purchaser gave its confirmation by the deadline and that, if more than one did, they would accept the highest offer.
On 10 October 2014, Mr Yeganeh applied for an injunction to restrain the Receivers from selling Sofia House. A witness statement that Mr Yeganeh made on 10 October in support of the application explained that he was making the application "for myself and on behalf of [SHG]" and contained this:
"It cannot be right that the Receivers can sell the property without ensuring that full value is achieved from the 2006 Permission. To do so would be negligent and would cause huge losses to [SHG]. We have requested many times that the Receivers await the outcome of the [CLEUD] application but they have refused to do so. As guarantor to [SHG] I cannot stand back and allow a sale at an undervalue."
The application came before Sales J on 13 October 2014 and again on 15 October, when he dismissed it. Mr Yeganeh was represented by Mr Michael Booth QC.
In the course of his judgment, Sales J said (in paragraph 8):
"[E]xtensive marketing efforts were made on behalf of the receivers to value and market the property. The receivers obtained, as I am satisfied, appropriate advice on the valuation of the property, both on the basis of an extant planning permission and on the basis of no planning permission but with hope value based upon the current policies of Westminster City Council in relation to conversion of offices to residential use. I am also satisfied, on the evidence, that the marketing of the property was at a price and on terms which the receivers were perfectly entitled to adopt in light of the advice that they had received and the situation which existed."
Having further noted that it was "clear on the authorities …, and on the evidence, that there was no duty upon the receivers to wait for clarification of the position in relation to the application for the certificate of existing use", Sales J arrived at these conclusions:
"21. Accordingly, I dismiss this application on the basis that, in my view, there is no serious issue to be tried that the receivers are acting in breach of duty in seeking to press on with their marketing campaign in respect of the property, which has now reached the stage of a contract race between two identified bidders.
22. Even if there were a serious issue to be tried for the purposes of the American Cyanamid test, I would refuse the present application on the balance of convenience.
23. If it transpired that the Claimant did have any valid claim against the receivers with respect to the marketing of the property, I consider that the value of that claim would be reasonably ascertainable in the usual way by reference to expert evidence of property values in the relevant area, and by reference to evidence of what has emerged from the marketing campaign which the receivers have in fact carried out."
The order made by Sales J provided for SHG to be joined as the Second Applicant, for the application to be dismissed, and for Mr Yeganeh to pay £21,949.50 in respect of the Receivers' costs and £17,918 in respect of the costs of the Banks, which were named as the Third and Fourth Respondents. Nothing has in fact been paid.
The claim form formally initiating the proceedings ("the 2014 Claim") had been issued on 14 October 2014. This specified Mr Yeganeh as the claimant and gave the Receivers and Banks as the defendants. The claim form stated:
"The first defendants [i.e. the Receivers] are not marketing the property properly whether as regards to its physical description or its existing or likely planning status and propose an imminent sale at a substantial undervalue to the substantial detriment of [SHG] and hence the guarantor. The second defendants [i.e. the Banks] are joined for the purpose of making any necessary representations in relation to injunctive relief as a result of the order of the Honourable Mr Justice Sales of 13 October 2014."
On 13 October 2014, the Council presented a further petition for the winding-up of SHG. This petition is still extant. I was told that it has recently been adjourned to April of next year.
On 21 October 2014, the Receivers exchanged contracts for the sale of the Underlease to Concord for £15 million. Completion took place on 21 November.
On 14 November 2014, pursuant to an order giving them permission to do so, the Banks served a counterclaim even though no particulars of claim had been served on them. At the...
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