Devon Commercial Property Ltd v Robert Adrian Barnett
| Jurisdiction | England & Wales |
| Judge | Paul Matthews |
| Judgment Date | 26 March 2019 |
| Neutral Citation | [2019] EWHC 700 (Ch) |
| Docket Number | Case No: C30BS157 |
| Court | Chancery Division |
| Date | 26 March 2019 |
[2019] EWHC 700 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BRISTOL
BUSINESS LIST (ChD)
Bristol Civil Justice Centre
2 Redcliff Street, Bristol, BS1 6GR
HHJ Paul Matthews
(sitting as a Judge of the High Court)
Case No: C30BS157
Hugh Sims QC and Neil Levy (instructed by Michelmores LLP) for the Claimant
Simon Davenport QC and Daniel Lewis (instructed by Kennedys Law LLP) for the Defendants
Hearing dates: 25 July – 3 August 2018
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.
Introduction
This is my judgment on the trial of the claim brought by the claimant, a limited company, against the defendants, chartered surveyors, now retired, but formerly partners in the well-known firm of GVA Grimley Ltd. The claim was begun by claim form dated 16 February 2016, seeking damages for various alleged breaches of duty arising out of the defendants acting as receivers appointed under the Law of Property Act 1925 of a freehold property formerly belonging to the claimant. Particulars of claim were served on 13 June 2016. The acknowledgement of service was filed on 27 June 2016, intimating an intention to defend the whole claim. The defence was filed on 29 September 2016 and a reply was served on the 3 November 2016.
I shall have to examine the facts in more detail later on, but a broad outline of the case at this stage can be obtained from the agreed list of issues, part of which, with slight cosmetic amendment, reads as follows:
1. On 18 August 2005 the claimant acquired the freehold land known as The Bottling Hall, Distribution Depot and Offices, Howden, Tiverton, Devon (title number DN 442449) (the “Property”).
2. The claimant and its connected company called Devon Cider Company Ltd (“DCC”) were wholly-owned by Hexshelf 8 Ltd, which was wholly-owned by Mr James McIlwraith and Mr Greg Birchmore. Mr Michael Ralph and Mr Birchmore were also the directors and/or agents of the claimant.
3. The claimant leased an area of about 70% of the Property to DCC for a term of 5 years from 24 June 2005 at a rent of £370,000 per annum (the “Lease”). DCC used the leased land to run a cider production, bottling and distribution business.
4. On 20 July 2007 the claimant granted a mortgage of the Property (the “Mortgage”) to State Securities plc (“State”).
5. On 30 September 2009 DCC went into administration.
6. On 4 November 2009 DCC's administrators sold its business and assets to Aston Manor Brewery Co Ltd (“Aston Manor”) for £2.3 million and granted a licence to Aston Manor to use the land within the Lease.
7. On 4 November 2009 State assigned the Mortgage to Aston Manor. Notice of the assignment was given to the claimant by letter dated 13 November 2009.
8. By 14 December 2009 the claimant had defaulted on the interest payments due under the Mortgage.
9. On 14 December 2009 Aston Manor served a default notice and appointed the defendants as LPA receivers in respect of the Property under the Mortgage. The defendants were employees of GVA Grimley Ltd.
10. The defendants owed a duty to the claimant to act in good faith, for a proper purpose and to obtain the best price reasonably obtainable for the Property.
11. Meetings took place between the claimant and the defendants on 17 December 2009 and 11 January 2010.
12. As at 29 January 2010 the sum secured by the Mortgage was £3,466,231.88.
13. In January 2010 a planning appraisal prepared by GVA Grimley for the defendants indicated that the prospect of obtaining residential planning permission for the whole Property was limited.
14. On 18 January 2010 the defendants rejected a proposal by the claimant that the Property should be jointly marketed with local agents, Tomlinson Associates.
15. On 17 February 2010 Emvic Lloyd Ltd (“Emvic”) made an offer to buy the Property for £4.25 million subject to contract and vacant possession by 1 May 2010.
16. On 24 February 2010 the defendants surrendered the Lease and granted a new lease to Aston Manor (the “New Lease”) for 3 years from 20 February 2010 at a rent of £300,000 per annum with a break clause exercisable by Aston Manor on 6 months' notice.
17. In March/April 2010 GVA Grimley marketed the Property and invited unconditional offers in excess of £4 million. Offers made ranged from £2 million to £3 million.
18. In December 2010 a company called Asphaltic Ltd made an offer of £4.3 million for the Property subject to vacant possession within 6 months.
19. On 24 December 2010 Aston Manor made an offer of £3.2 million.
20. On 25 January 2011 Edward Symmons LLP produced a valuation of the Property for the defendants of £2 million (with vacant possession), £2.25 million (as a bottling plant), and £2.5 million (fully equipped bottling plant with all fixtures and fittings).
21. On 12 May 2011 Aston Manor made a final offer of £2.75 million together with payment of certain costs stated to amount to over £100,000.
22. On 25 May 2011 a sale of the Property was completed to Aston Manor Freeholds Limited (a newly formed subsidiary of Aston Manor) for £2.75 million excluding VAT.
23. There was no surplus on the sale of the Property returnable to the claimant as mortgagor.
It will be seen that the factual situation in this case is unusual. First of all, the claimant freeholder had granted a lease of the greater part of its freehold estate to its connected company, DCC. It then mortgaged the whole freehold estate to a mortgagee. DCC went into administration, and the administrators sold its business and assets to Aston Manor, to whom they granted a licence to use the land falling within the lease. Aston Manor then took an assignment of the mortgage from the mortgagee and, on the claimant's default under the mortgage appointed the defendants as LPA receivers. Those receivers then put an end to the lease and granted a new one to Aston Manor. They later marketed the freehold estate, and ultimately they sold it to a subsidiary of Aston Manor. Essentially, the claimant claims that Aston Manor was a special purchaser and that the defendants did not act correctly in selling the land to Aston Manor, in particular that they did not achieve a high enough price.
In summary, the claimant alleges that the defendants owed it a number of important duties, including a duty to act in good faith, to exercise their powers for the purpose of securing repayment of the debt owed to the mortgagee and not for any other purpose, and not to place themselves in a position of conflict or potential conflict, and a duty to take reasonable steps to obtain the best price reasonably obtainable at the material time, taking proper steps to market the Property. The defendants accept that they owed the claimant duties to act in good faith for a proper purpose, namely the realisation of the assets comprised in the security and obtaining repayment of the sum secured, and to obtain the best price reasonably obtainable at the time that the power of sale was exercised, without needing to await or effect any increase in value or improvement of the Property. Subject to that, however, the allegations as to duties are denied.
The claimant alleges that the defendants acted in breach of the claimed duties in various ways. These included (i) by placing themselves in a position of conflict of interest and/or acting under the direction or control of Aston Manor, (ii) failing to treat Aston Manor as a special purchaser and failing to market the Property properly, with vacant possession or with the ability to obtain vacant possession at short notice, and (iii) replacing the original lease with the New Lease. The defendants deny all the breaches of duty alleged. The claimant further alleges that the defendants' breaches of duty have caused it significant losses, amounting to several million pounds. The defendants deny causing any such losses.
Procedure
Case management and costs and case management conferences were held in March 2017, though the directions given were subsequently amended on several occasions. Disclosure was given by both sides by list in July 2017, although supplemented in the case of the claimant by further lists in August and October 2017, and in the case of the defendants by a further list in November 2017. The directions to trial given included directions as to expert evidence. I shall return to these. Expert reports were exchanged in November 2017, and joint expert statements produced in January 2018. A pre-trial review was held by me on 15 June 2018.
At the trial before me the claimant was represented by Hugh Sims QC and Neil Levy, instructed by Michelmores LLP, and the defendants were represented by Simon Davenport QC and Daniel Lewis, instructed by Kennedys Law LLP. On the third day of the trial there was an argument about the scope of the pleaded claim and the impact that that might have on cross-examination of the claimant's witnesses. The defendants had served a Note on the first day of the trial complaining that further particulars of acting in bad faith had been set out in the claimant's skeleton argument, although (for the most part) they had not been referred to in the particulars of claim or even the reply. In the Note, it was argued that particulars of bad faith were like particulars of dishonesty, and had to be specifically set out if they were to be relied upon. But when the matter came to be argued, it turned out to be much narrower than that. Once Mr Sims QC, for the claimant, confirmed that he was not advancing any case of dishonesty against the defendants, but only one of acting in bad faith or for an improper purpose, the objections fell away, and it was not necessary for me to rule on the matter.
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Robert Sofer v SwissIndependent Trustees SA
...own is not fraud or dishonesty for the purposes of private law: see the cases cited in Devon Commercial Property Limited v Barnett [2019] EWHC 700 (Ch), [180]–[186]. But, subject to that, overall the meaning of the phrase is clear enough. The word “personal” makes clear that the phrase doe......