Colin Gwyer & Associates Ltd v London Wharf (Limehouse Ltd)
| Jurisdiction | England & Wales |
| Judgment Date | 13 December 2002 |
| Neutral Citation | [2002] EWHC 2748 (Ch) |
| Docket Number | Claim No. HC 01C05378 |
| Court | Chancery Division |
| Date | 13 December 2002 |
AND BY PART 20 CLAIM
[2002] EWHC 2748 (Ch)
Mr Leslie Kosmin Q.c.
(sitting As A Deputy Judge Of The Chancery Division)
Claim No. HC 01C05378
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
Mr DAVID FISHER (instructed by Messrs Beachcroft Wansbroughs) appeared on behalf of the Claimants and Part 20 Defendants
Ms HELEN GALLEY (instructed by Messrs Triggs Wilkinson Mann) appeared on behalf of the Defendants and Part 20 Claimants
APPROVED JUDGMENT
Hearing: Tuesday 19 November 2002 - Friday 23 November 2002
Tuesday 26 November 2002 and Wednesday 27 November 2002
Judgment: Friday 13 December 2002
I direct pursuant to CPR Part 39 PD6 that no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic.
Signed:
Date: 13th December 2002.
Introduction
This is the trial of a claim made under Part 8 of the CPR in which the Claimants, Colin Gwyer & Associates Limited ("CGA") and Mr A T R Palmer ("Mr Palmer"), seek declaratory relief in respect of the rights of CGA as a shareholder of the First Defendant, London Wharf (Limehouse) Limited ("the Company") to appoint a director, the validity of a meeting of the board of directors of the Company held on 5th September 2001 and the resolutions passed at such meeting. By way of a Part 20 Claim, brought as a derivative action in accordance with Part 19.9 of the CPR, the Second and Third Defendants, Eaton Bray Limited and Mr James Ramsden, seek declarations to the opposite effect. The Defendants to the Part 20 Claim are Mr Palmer, Mr Howells (the director nominated by CGA), CGA and the Company. For ease of reference the Claimants and Part 20 Defendants will be referred to in this judgment as "the Claimants" and the Defendants and Part 20 Claimants will be referred to collectively as "the Defendants".
The Company was incorporated in England and Wales on 26 November 1992 under the Companies Acts 1985 to 1989 as a private company limited by shares. Its purpose is to hold the Head Lease of a property known as 28 Narrow Street, London E14 ("the Building") which was made 25 May 1978 between (1) Thames Water Authority and (2) Packadel Properties Limited ("Packadel"). The Building comprises three residential flats and ground floor accommodation in a converted warehouse alongside the River Thames at Limehouse. Flat 1, which is located on the first floor, is owned by CGA but is currently unoccupied. Flat 2, which is located on the second floor, is owned and occupied by Mr Palmer. Flat 3, which is on the top floor, is owned by Eaton Bray Limited ("Eaton Bray") and occupied by Mrs Rae Hoffenberg as its licensee. Each of CGA, Mr Palmer and Eaton Bray holds one share in the Company. The ground floor area is allocated between the tenants of the Building as common parts and may be used for car parking, storage, utility and leisure purposes.
The dispute between the parties concerns the validity of a board meeting of the Company held on 5th September 2001 at which the board comprising Mr Palmer and Mr Howells resolved to accept terms of settlement put forward by CGA of legal proceedings for the forfeiture of the lease of Flat 1 commenced by the Company against CGA in January 2001. The proceedings began as the result of CGA's decision to embark upon substantial alterations to Flat 1 without obtaining the consent of the Company. The building work started in the spring of 2000 and carried on uninterrupted until about February 2001 and thereafter into the summer of 2001. The resolution of the directors on 5th September 2001 to settle the proceedings against CGA, very largely on its terms, is vigorously opposed by Eaton Bray and its licensee, Mrs Hoffenberg, as being contrary to the interests of the Company and having been passed for an improper purpose. The directors, Mr Palmer and Mr Howells are accused of having acted in breach of fiduciary duty. In addition, a challenge is made to the validity of the appointment of Mr Howells as a director and to the alleged failure to convene the board meeting on reasonable notice so that Mr Ramsden, the representative of Eaton Bray, might attend.
Regrettably, this is but the latest in a long history of disputes between the tenants which has marred their occupation and enjoyment of the Building since at least 1991. The bad feeling and personal antagonism that they have for each other has been a notable feature of the evidence given at this trial. It has resulted from time to time in the making and repetition of unsubstantiated allegations of dishonesty and impropriety against one another. Inevitably, I shall have to refer to some of these allegations in the course of this Judgment.
Background
Fortunately, much of the complicated, early history of the Company and the relations between the tenants is not in issue and I will endeavour to summarise it as follows. In May 1978 Packadel, which was a company controlled by Mrs Hoffenberg and her late husband, acquired the long lease of the Building from the freeholder, Thames Water. Mrs Hoffenberg is a project consultant and architect designer by profession and was the majority shareholder in Packadel. Between 1978 and 1979 the Building was converted by Packadel into three flats, with the ground floor left empty with the intention of converting it into a further flat in the future if and when permission could be obtained from Thames Water and the local authority. Thereafter, the first and second floor flats, Flats 1 and 2, were sold on long leases to a Mr and Mrs Davis and a Mr and Mrs Du Boskey respectively. Flat 3 was occupied by Mr and Mrs Hoffenberg as their own home. Each of the flatholders was given permission to park a car in the ground floor area but the ground floor remained in the ownership of Packadel.
In around early 1989 the lease of Flat I was acquired from Mr and Mrs Davis by CGA. CGA is a company incorporated in Guernsey whose controlling shareholder and director is Mr Colin Gwyer ("Mr Gwyer"), who is himself an experienced builder and property developer, resident in Switzerland. In October 1989 Packadel went into administrative receivership and partners in the firm of Arthur Andersen were appointed as joint administrative receivers. In September 1991 Mr Gwyer wrote to Mrs Hoffenberg asking for permission to make substantial alterations to Flat 1. At this stage Mrs Hoffenberg had no authority to grant or refuse permission and the matter was referred to the receivers. In March 1992 the receivers replied to Mr Gwyer that they had no objections to the proposed alterations and gave provisional authorisation, subject to any future objections that might arise such as planning permission. Mr Gwyer described the proposed works in his correspondence with the receivers as being of an internal and non-structural nature and the receivers sought advice in this regard from Chestertons, their surveyors. However, no work was begun by CGA and in June 1993 the receivers wrote again to CGA stating that, whilst their advisers had no objections to the proposed works, no formal application for consent had been made and no formal consent had been granted. During this period it also seems that CGA sought to negotiate the purchase of the Head Lease from the receivers but without success.
In or about September 1991 Mr Du Bosky was made bankrupt and his flat, Flat 2, was marketed by his trustee in bankruptcy. Shortly prior to his insolvency Mr Du Bosky had agreed to sell his flat to Mr Palmer who had been permitted to go into occupation pending completion of the sale formalities. The result of the bankruptcy was that Mr Palmer was obliged to negotiate the purchase from the trustee at an enhanced price. It appears that Mr Palmer, who is a film director by profession, at one stage considered the purchase of Mrs Hoffenberg's flat if she could be persuaded to sell. Mrs Hoffenberg was unwilling to consider any such sale and secured her continued occupation of the premises by means of the intervention of her brother, Mr Norman Bank, who through a company called Rivenhall Properties Limited ("Rivenhall"), acquired the Head Lease from the receivers of Packadel. In addition, an offshore discretionary trust was established to hold the shares in a company which would hold the lease of Flat 3 for the benefit of Mrs Hoffenberg. This company was Eaton Bray, which negotiated the purchase of the lease of Flat 3 from the receivers.
The Company was originally incorporated in November 1992 to act as the management company for the Building in place of the former management company that had been set up by Packadel. However, in August 1994 CGA, Mr Palmer and the Company commenced legal proceedings against Rivenhall under the Landlord and Tenant Act 1987 on the basis that before the long leasehold interest in the Building was transferred from Packadel to Rivenhall the tenants should have been given the right of first refusal. The proceedings were eventually settled by an agreement dated 9 October 1995 between (1) Rivenhall (2) the Company (3) CGA (4) Mr Palmer and (5) Eaton Bray ("the Settlement Agreement") under which the Head Lease was acquired by the Company and new long underleases were granted to the three flatholders, CGA, Mr Palmer and Eaton Bray. (These leases were each eventually dated 3 July 1997 and were for a term of 99 years from 25 May 1978.) Each flatholder was to become an equal shareholder in the...
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