Gomba Holdings (U.K.) Ltd v Minories Finance Ltd (No. 2)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SCOTT |
| Judgment Date | 30 January 1992 |
| Judgment citation (vLex) | [1992] EWCA Civ J0130-9 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 92/0417 |
| Date | 30 January 1992 |
[1992] EWCA Civ J0130-9
The President,
Lord Justice Stocker
and
Lord Justice Scott
92/0417
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
CIVIL DIVISION
(On appeal from Order of Vinelott J.)
Royal Courts of Justice,
MR. T. CULLEN Q.C. and MR. A. TRACE (instructed by Messrs. Holman, Fenwick & Willan) appeared for the Appellants.
MR. R. POTTS Q.C. and MR. R. ADKINS (instructed by Messrs. Freshfields) appeared for the Respondents.
This is the judgment of the Court. This is an appeal, brought with the leave of the Judge, against an order made by Vinelott J on 19 December 1989. The appeal raises important and, to our minds, difficult questions of principle regarding the right of a mortgagor on the taking of a mortgage account to object to the level of costs, charges and expenses which the mortgagee claims to be entitled to charge against or retain out of the mortgaged property.
There are eight corporate Plaintiffs. Each is a member of the group of companies known as the Gomba Group.
The 1st Defendant, Minories Finance Ltd., made substantial advances to the Plaintiffs. The repayment of the advances was secured by a number of security documents. The 2nd and 3rd Defendants, Mr. Homan and Mr. Bird, were appointed receivers pursuant to those security documents.
The circumstances in which this litigation arose are described in the judgment delivered by Vinelott J on 19th December 1989 as follows:
"Between the 30th October 1984, and the 9th January 1985 each of the first four Plaintiffs entered into a mortgage debenture charging its assets to secure repayment of moneys advanced to it by the 1st Defendant, which was then known as Johnson Matthey Bankers Limited. By two mortgages dated 18 February 1985 and 25th October 1985 respectively, the sixth Plaintiff entered into legal mortgages, charging specific assets to secure moneys owed to the First Defendant by the Second Plaintiff and its subsidiaries. On 17th July 1985 the Eighth Plaintiff, also entered into legal mortgages charging specific assets to secure moneys owed to the First Defendant by the Second Plaintiff and its subsidiaries. Lastly, on the 6th June 1985 the first five Plaintiffs entered into a guarantee and debenture charging all their assets to secure moneys owed by them, or by others of the first five Plaintiffs, to the First Defendant.
"Demands were made for the repayment of the moneys advanced to companies in the Group, and when the demands were not met, the Second and Third Defendants were appointed joint receivers of the assets of the first five Plaintiffs, and of the assets specifically charged by the Sixth and Seventh Plaintiffs. On the 18th March 1986 the first six Plaintiffs issued an originating summons seeking accounts of the moneys owed under these debentures and mortgages, and redemption on payment of the moneys found due. Between that date and the 11th February 1987 the Plaintiffs succeeded in raising a sum sufficient to meet the liabilities, the maximum amount of which had been quantified in the course of proceedings by Mr. Shamji who had sought unsuccessfully to set aside the appointment of the receivers. The receivers were then discharged, as regards the first five Plaintiffs, on the 19th December 1986, as regards to the Sixth and Seventh Plaintiffs on the 11th February 1987.
"However, there were outstanding disputes as to the accounts submitted by the Defendants and the receivers. On the 3rd March 1987 the originating summons was amended by adding the Seventh and Eighth Plaintiffs, and on the 19th March 1987 it was further amended to seek accounts of all transactions entered into, and of all dealings with the property of the Plaintiffs by the First Defendant, and of all moneys received by or payment made by the First Defendant or by the Second or Third Defendants, and an inquiry whether any sums were due from the First Defendant to the Plaintiffs. Redemption has been delayed pending the taking of these accounts and the inquiry."
Mortgage accounts having been submitted to the Plaintiffs by the First Defendant and by the receivers an Order for various accounts and inquiries was made in Chancery Chambers by Master Munrow on 14th March 1988. One of these was "An inquiry whether anything and if so what is due to the 1st Defendant for any and what costs charges and expenses properly incurred under or in respect of the said mortgage debentures and mortgages including the costs of this action." Another was "An account of all payments made by the 2nd and 3rd Defendants as Receivers as aforesaid."
The 14 March 1988 Order recorded that accounts had already been supplied to the Plaintiffs and that those accounts had discharged the 1st Defendant's accounting obligations "subject only to the Plaintiffs' rights under Order 43, rule 5 of the Rules of the Supreme Court 1965 and their rights to require vouching of the said accounts."
Order 43 rule 5 provides that:
"Any party who seeks to charge an accounting party with an amount beyond that which he has by his account admitted to have received or who alleges that any item in his account is erroneous in respect of amount or in any other respect must give him notice thereof stating, so far as he is able, the amount sought to be charged with brief particulars thereon or, as the case may be, the grounds for alleging that the item is erroneous."
The 14 March 1988 Order provided a timetable for service by the Plaintiffs of Notice of Objection and for the Defendants to reply thereto.
The accounts which had been submitted to the Plaintiffs had dealt not only with the 1st Defendant's costs, charges and expenses but also with the Receivers' receipts and payments.
On 22nd June 1988 the Plaintiffs served Notice of Objection to these accounts. It is worth noting that at this stage the Plaintiffs were in possession of no details other than the bare figures in the accounts. Their objections were made under four numbered heads, namely:
"1. Unreasonable and/or improper amount.
2. Breakdown of figure required.
3. Vouching required.
4. Amount not chargeable to Plaintiff."
In addition, the Notice of Objection stated that in respect of any sum properly chargeable to the Plaintiffs i.e. any sum in respect of which objection number 4 could not be maintained, the Plaintiffs required "taxation as to the amount thereof and/or that such be referred to the Enquiry directed by Chief Master Munrow in the said Order."
The Notice of Objection was expressly stated to be "without prejudice to any challenge that may be made in any subsequent proceedings, for instance by way of an action in negligence".
Several of the items in the accounts were made the subject of the Objection numbered 1, i.e. "unreasonable and/or improper amount". The majority of these items related to solicitors' charges, other professional advisers' charges or receivers' remuneration. The total amount under challenge is, I understand, a sum in the region of £1.8 million.
On 13th October 1988 an order was made by Master Munrow directing the trial as a preliminary issue of certain questions arising out of the Plaintiffs' Notice of Objection. The questions were answered by Vinelott J in his judgment and Order of 19th December 1989. There is no appeal against some of the answers. The question relevant to this appeal, as posed by the Order of 13th October 1988, was:
"Whether….. (c) The Plaintiffs are entitled….. to raise an objection to the Defendants' accounts ….. of the nature….. specified in Objection Number….., namely, that the items were unreasonable in amount….."
Before referring to the manner in which the learned judge dealt with this question it is convenient to refer to some of the provisions of the security documents.
The mortgage deeds, other than the Guarantee and Debenture of 6th June 1985, are in similar, although not in identical, terms. It is not necessary to refer to more than one of them. Vinelott J chose the Legal Mortgage dated 18 February 1985 granted by the 6th Plaintiff. We will do the same. By Clause 2 of this mortgage, the mortgagor guaranteed to pay to the 1st Defendant on demand:
"(c) All costs charges and expenses howsoever incurred by the Bank or any Receiver under or in relation to this mortgage….. on a full indemnity basis including (but without prejudice to the generality of the foregoing) all costs charges and expenses which the Bank or any Receiver may incur in enforcing this security….."
Under Clause 7 the 1st Defendant was given power to appoint a receiver and "either at the time of his appointment or any time thereafter [to] fix his remuneration…..".
Clause 8 provided that:
"All moneys received by the Receiver shall be applied by him in the following order of priority;
"(1) In satisfaction of all costs charges and expenses of and incidental to the appointment of the Receiver and the exercise of any of his powers and all outgoings paid by him and his remuneration.
"(2) In or towards satisfaction of the indebtedness hereby secured."
So the 1st Defendant was entitled to "all costs charges and expenses….. on a full indemnity basis….." and the Receivers were entitled to retain out of the mortgaged property their remuneration as fixed by the 1st Defendant.
The corresponding language of the Guarantee and Debenture dated 6 June 1985 is somewhat different. Clause 7 thereof gave power to the 1st Defendant (inter alia) to"determine the remuneration of the Receiver". Clause 9 directed that moneys received by the receiver be applied:
"(a) in satisfaction of all costs charges and expenses properly incurred and payments properly...
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