CNM Estates (Tolworth Tower) Ltd v Simon Peter Carvill-Biggs
| Jurisdiction | England & Wales |
| Judge | Lord Justice Males,Sir Geoffrey Vos,Lord Justice Newey |
| Judgment Date | 05 May 2023 |
| Neutral Citation | [2023] EWCA Civ 480 |
| Docket Number | Case No: CA-2022-001747 |
| Court | Court of Appeal (Civil Division) |
[2023] EWCA Civ 480
Sir Geoffrey Vos, MASTER OF THE ROLLS
Lord Justice Newey
and
Lord Justice Males
Case No: CA-2022-001747
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
JULIA Dias QC (sitting as a Deputy Judge of the High Court)
[2022] EWHC 1583 (Comm)
Royal Courts of Justice
Strand, London, WC2A 2LL
Christopher Lundie (instructed by RSW Law) for the Appellant
Mark Simpson KC and Isabel Barter (instructed by Kennedys Law LLP) for the Respondents
Hearing date: 22 March 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on Friday 5 May 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
This is an appeal from the decision of Ms Julia Dias QC (“the judge”) in which she held (1) that the appellant claimant (“CNM”) needed to obtain (and would be refused) relief from sanctions in order to be allowed to amend its Particulars of Claim to allege that the respondent defendants (“the Receivers”) were guilty of gross negligence; and (2) that permission to amend in order to allege wilful misconduct by the Receivers would be refused as a matter of discretion. CNM challenges both decisions. Although these were case management decisions which are not usually suitable for an appeal, I granted permission to appeal because it appeared at least arguable that the judge was wrong to have applied the relief from sanctions test in the circumstances of this case.
Background
Much of the argument before us was concerned with whether CNM has an arguable case. I therefore take the facts from CNM's Particulars of Claim, in accordance with the approach of the Supreme Court in Okpabi v Royal Dutch Shell Plc [2021] UKSC 3, [2021] 1 WLR 1294 at [103] to [107], although many of them are disputed.
CNM was incorporated on 19th August 2014. Mr Wahid Samady was a director of the company and its ultimate beneficial owner. In October 2015 CNM acquired a property known as Tolworth Tower for a purchase price of about £60.5 million including acquisition costs, of which £54 million was funded by loans. CNM intended to develop the site, by refurbishing Tolworth Tower itself, re-cladding the north wing of a hotel on the site and converting office space into 78 residential apartments. In addition it planned to demolish a building known as “the Podium” in order to construct two new buildings comprising approximately 200 residential units and 10,000 square feet of retail space.
Unfortunately CNM defaulted and remained in default on its loan repayments when it failed to make a payment within five business days of 28 th April 2017. This led to the lender entering into a contract for the sale of its loans to Tolworth Loan Ltd, a company connected to Meadow Capital Management LP (“Meadow”). On 3 rd August 2017 CNM instructed the estate agents Knight Frank LLP to market the development site with a view to selling it for the best obtainable price. Before the marketing had begun, however, the Receivers were appointed pursuant to the lender's rights under the mortgage and debenture which formed part of the security for the loans.
CNM contended that its default under the loans was itself caused by the lender and made a claim against the lender accordingly. However, that claim has been settled and we are not concerned with it. The only remaining claim in this action is against the Receivers and proceeds on the basis that they were duly appointed.
On or about 19 th October 2017 the Receivers engaged Knight Frank to market the development site for sale. Knight Frank commenced marketing on or about 20 th October 2017.
One unit in the Podium, known as the Broadway Bar Café (“the Café”), was subject to a 35 year lease dated 30 th July 2003 in favour of Wizard Inns Ltd (“the Café Lease”). There was also a sub-Lease of the Café in favour of Hartland Residential Home Ltd. Wizard Inns surrendered the Café Lease on 20 th February 2017, but the sub-lease remained in being.
By a contract dated 12 th October 2017 (“the Hartland Agreement”) Mr Samady and his business partner Mr Michael Ross purchased an option either to take an assignment of the Café Sub-lease or to purchase the shares of Hartland. They were therefore in a position, by one route or another, to do a deal with any purchaser of the development site which would enable the purchaser to obtain vacant possession of the Podium. Vacant possession was necessary in order to permit the full development which CNM had intended. The ability to obtain vacant possession of the Podium was highly material to the value of the development site as a whole.
CNM pleads, at paragraph 72 of its Particulars of Claim, that:
“At all material times, once it became apparent to them that refinance and redevelopment in accordance with CNM's original intentions was not achievable by reason of the events complained of herein, Mr Samady and Mr Ross have been/were willing to negotiate a sale of the Café Sub-lease to the Receivers and/or to a purchaser of the Development Site. Ownership of the Café Sub-lease, or its surrender, would allow/have allowed a purchaser of the Development to easily take vacant possession of the Podium and proceed with the intended second phase of development, and would therefore have/have had a material favourable impact on the value of the Development Site to that purchaser.”
The words which I have italicised were the subject of a Request for Further Information. CNM's response was that the date when it became apparent that refinance and redevelopment in accordance with its original intentions was not achievable was 8 th December 2017, the date when the Receivers entered into a contract for the sale of the property to a company called Tolworth Tower Investment Ltd (“TTIL”). Thus the plea in paragraph 72 must be understood as limited to a plea that CNM was willing to negotiate a sale of the Café Sub-Lease after 8 th December 2017, when the development site had already been sold. Any such negotiation would therefore have been with the purchaser of the site. It follows that the plea that CNM was willing to negotiate a sale of the Café Sub-Lease with the Receivers is incoherent and can be ignored: by the time CNM says that it was willing to negotiate, the Receivers had no further interest in the site.
CNM pleads further, at paragraph 74, that:
“The facts set out at paragraph 72 above (including the willingness to sell the Café Sub-lease) were communicated (i) to Knight Frank by no later than 14 November 2017, and (ii) to the Receivers (specifically Mr Khalastchi) by no later than 15 November 2017. Reliance is placed upon emails sent respectively on those dates by Mr Samady (i) to Mr Justin Gaze of Knight Frank, copied to the Receivers, and (ii) to, or copied to, the Receivers. The purchase of the shares in Hartland by Mr Samady and Mr Ross, ultimately achieved by means of a special purpose vehicle, would have been highly material to any prospective purchaser of the Development Site if, as should have been the case, the Receivers had informed such prospective purchasers of that fact, and that Mr Samady and Mr Ross were anxious to conclude arrangements in connection with the Café Bar on terms favourable to a person wishing to develop the Development Site. This would have been critical to any development business plan.”
The emails referred to in this paragraph say, respectively, as follows:
“I would like to inform you that we have agreed and signed terms for the Vacant Possession of the Pub Lease at TT. Please inform buyers that VP [vacant possession] would be available.”
and“Re the pub lease agreement to purchase lease holder has been entered which is good news for the asset and is a key driver of value for bidders in the sale process. Therefore urgently the sales data room requires updating and each interested party informed without which bids will be somewhat meaningless.”
Although CNM's pleading refers also to a conversation with Mr Justin Gaze of Knight Frank, CNM's counsel, Mr Christopher Lundie, confirmed that CNM does not contend that any material information was conveyed in this conversation beyond what is said in the emails quoted above. It is apparent that the emails say rather less than is claimed for them in the pleading. Moreover, CNM does not allege that it ever gave any indication of the terms on which vacant possession would be available or the price which it would demand from any purchaser. It merely pleads that the terms would be a matter for negotiation.
CNM admits that the Receivers requested a copy of the agreement which Mr Samady was saying had been signed, and that Mr Samady declined to provide this. Accordingly the knowledge which the Receivers had was limited to the content of the two emails quoted above, and has to be seen in the context that Mr Samady was not prepared to provide the agreement which he claimed to have concluded, and that although he was saying in general terms that vacant possession would be available, he did not at any stage give any indication of the terms (and in particular the price) on which it would be available.
Paragraph 75 of the pleading deals with an online virtual data room:
“The Receivers opened, or caused to be opened, an online virtual data room (the ‘Data Room’) for the purpose of marketing the Development Site and making information available (electronically) to potential purchasers. The Data Room included the 2003 Café Lease, but did not include (i) any information concerning the surrender of that lease to which the title had been closed, or (ii) any information...
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