First National Trustco (UK) Ltd v Mary Louise Mcquitty (as Personal Representative of the Estate of Kevin Page (Deceased) and as Representative for all the other Members of the Unincorporated Association Known as Bahia Blanca Holiday Club)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Peter Jackson,Lady Justice Asplin,Lord Justice Henderson |
| Judgment Date | 05 February 2020 |
| Neutral Citation | [2020] EWCA Civ 107 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2019/1334 |
| Date | 05 February 2020 |
[2020] EWCA Civ 107
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE BUSINESS AND PROPERTY COURTS OF ENGLAND AND
WALES
BUSINESS LIST (CHANCERY DIVISION)
Joanna Smith QC
HC2017002735
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Henderson
Lord Justice Peter Jackson
and
Lady Justice Asplin
Case No: A3/2019/1334
Elspeth Talbot Rice QC (instructed by Keystone Law) for the Appellants
Alan Gourgey QC and Jack Watson (instructed by Ashtons Legal) for the Respondents
Hearing date: 23 January 2020
Approved Judgment
This appeal turns on the construction of an indemnity clause in a Deed of Trust. It raises no new point of law.
The Appellants seek a declaration that the clause (Clause 14) obliges the First and Third Respondents to indemnify the First Appellant for €2.7 million of Spanish taxes levied on the Second Appellant as the legal owner of timeshare apartments in the Canary Islands. That claim was dismissed by Joanna Smith QC, sitting as Deputy Judge of the High Court, in a decision dated 20 May 2019. She also dismissed a range of other arguments in support of the declaration, based on estoppel, trustee indemnities and claims for knowing receipt; claims for dishonest assistance were abandoned before trial. There is no appeal from those conclusions. The only aspect of the decision that is subject to this appeal, for which permission was given by Lewison LJ on 1 July 2019, concerns the construction of Clause 14.
The First Appellant is First National Trustco (UK) Ltd (‘FNTC’). It is a company incorporated in England and Wales that is part of the First National Trustee Company Group, a professional trustee operating in the timeshare leisure business and acting as trustee for 100–150 timeshare resorts in Spain. FNTC is the Trustee of this timeshare scheme and owns the Second Appellant, Bahia Blanca Club B Limited (‘BBCB’), a company which itself holds the title to the apartments that are the subject of the timeshare scheme.
The timeshare owners are members of the Bahia Blanca Holiday Club (‘the Club’). The First Respondent is representative of the Members. The Third Respondent, Bahia Blanca Leisure Limited (‘BBLL’), stands in the shoes of the Founder Member of the Club.
Background
Timeshare resorts in Spain are commonly held through a club trust structure, under which the legal ownership of individual apartments is vested in an owning company, in this case BBCB. The owning company is in turn wholly owned by an independent custodian trustee, in this case FNTC, which holds and controls the owning company in trust for the benefit of the Members of the Club from time to time. Members each purchase occupation rights over the apartment in the form of individual weeks and thus enjoy rights of occupation and become subject to the rights and obligations set out in the Constitution of the Club.
The Bahia Blanca Timeshare Resort (‘the Resort’) in Gran Canaria, created in 1988, made various timeshare apartments available to members of the public. TS International PLC (‘TSI’) was the owner and developer of the property on which the apartments were built and was the Founder Member of the Club.
The legal framework for the Club is to be found in its Constitution, the Deed of Trust and the Management Agreement. The latter documents appear in draft as Schedules to the Constitution.
The Constitution
The Club was established by a Constitution dated 1 January 1988. It was executed by TSI as Founder Member and is subject to English law. The Constitution governs the rights of Members of the Club and also sets out the role of the Committee, which carries out the decision-making in respect of the Resort. The Objects of the Club appear at Clause 4:
“4. Objects.
The Club shall be a non-profit making Club whose object is to secure for its Members the ownership of exclusive rights of occupation of the Apartments for such specific periods in each year as shall be allocated to Members in perpetuity.”
Under Clause 7, TSI agreed to transfer the apartments to the ‘Owning Company’. This was initially Midmark 10 Ltd, a company limited by guarantee and incorporated in Scotland. Membership of the Owning Company was limited to an independent custodian trustee (or joint trustees) who was to hold and control the Owning Company in trust for the benefit of the Members of the Club from time to time upon the terms of the Deed of Trust. Clause 8 provides:
“8. Rights of Occupation.
[TSI] shall procure that the Owning Company engages in no trading activity whatsoever but shall keep the respective Apartments free from any mortgage, lien or encumbrance and shall not suffer or permit anything to be done which might prejudice the rights of use and occupancy of the Club and its Members in the Apartments, and shall permit occupation thereof as follows:…”
The original joint trustees were Midland Bank Trust Company Ltd and Landmark Title & Trust Ltd. Since January 1997 that role has been performed by FNTC alone.
In consideration for the transfer of apartments to the Owning Company and the vesting of the ownership of the Owning Company in the Trustees, TSI was entitled to 51 membership certificates created in respect of each apartment transferred. It could sell its membership certificates to members of the public and was entitled to all unsold membership certificates in relation to each apartment. A membership certificate entitled the Member to use and occupy the relevant apartment for a specified week in each year. Individual purchasers of timeshare weeks — the Ordinary Members — were granted rotational rights of occupation under membership contracts that also contained their agreement to be bound by the Constitution.
Clause 11 of the Constitution concerns the Committee, made up of three Ordinary Members of the Club (who are elected) and two who are appointed by the Founder Member. The Committee has the power to:
“… do all things that may be necessary for the carrying out of the objects of the Club and for its general management and shall be entitled to delegate to the Management Company such of its powers as may be appropriate to enable the Management Company to properly perform its functions.”
and (amongst a number of specific powers) it has the power provided by Clause 11(f)(v):
“(v) Except insofar as delegated to the Management Company under the Management Agreement, to enter into all contracts and agreements which the Committee may deem necessary or desirable in connection with the management of the Club and to apply the funds of the Club in payment of the expenses of management, administration and running of the Club.”
Clause 12 of the Constitution concerns the Members' liability for management expenses. I cite it in full as we received argument about the relevance, if any, of subclauses (a)(v) and (b), which must be read in the context of the clause as a whole.
“12. Member's Liability for Payment of Management Expenses etc.
(a) The Members of the Club shall contribute in accordance with the terms of the Management Agreement to all reasonable costs incurred by the Club including and without prejudice to the generality of the foregoing the following:
(i) Maintenance, repair, redecoration, cleaning, and (where necessary) renewal of the Apartments, services and facilities provided by the Club or the Management Company for the benefit of the Members whether exclusive or in common with others entitled thereto.
(ii) Maintenance, repair and (when necessary) replacement of furniture, equipment, utensils, provisions, furnishings, fittings and fixtures in or about or pertaining to the Apartments.
(iii) Insurance of the Apartments and the contents thereof owned [by] the Club for the full reinstatement cost thereof, and other insurance whether or not relating to the Apartments which the Committee or the Management Company shall consider necessary or appropriate for the Members' benefit.
(iv) The full amount of the rent payable by the Management Company to any Member if it rents from a Member in order to facilitate maintenance, repair or reconstruction works, such rent to be calculated at the Management Company's then current published rates.
(v) All outgoings incurred in respect of the Apartments including electricity, gas, water, rates, contributions to the community of property owners to which the Apartments belong and any taxes or other charges or impositions whether of an annual or recurring nature or otherwise.
(vi) All work and acts which are required to be done to comply with any statutory provisions or the directions or notices of any governmental, local or public authority.
(vii) Any reasonable charges which may be incurred in the management and preservation of the value of the Club's property and the running of the Club's affairs or the provision of services by the Management Company, including the provision of reception and security services.
(viii) The maintenance of a sinking fund (if one is established) for the replacement of capital items of the Club's property.
(ix) The maintenance of any reserve funds requested by the Trustee in accordance with the Deed of Trust.
(x) The fees and expenses of the Trustee and all other costs, expenses or payments to the Trustee under the Deed of Trust and the fees and expenses of the auditor, lawyers and other professional advisers hereinbefore referred to.
(xi) Membership fees of any golf, tennis or other club pursuant to any...
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