Hotel Portfolio II UK Ltd ((in Liquidation)) v Andrew Joseph Ruhan
| Jurisdiction | England & Wales |
| Judge | Lord Justice Newey,Lord Justice Males,Lord Justice Birss |
| Judgment Date | 04 October 2023 |
| Neutral Citation | [2023] EWCA Civ 1120 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2022-001487 |
and
[2023] EWCA Civ 1120
Lord Justice Newey
Lord Justice Males
and
Lord Justice Birss
Case No: CA-2022-001487
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
Mr Justice Foxton
[2022] EWHC 383 (Comm) and [2022] EWHC 1695 (Comm)
Royal Courts of Justice
Strand, London, WC2A 2LL
Anthony de Garr Robinson KC, Sebastian Kokelaar and Stephen Ryan (instructed by Richard Slade and Company) for the Appellant
James Pickering KC and Samuel Hodge (instructed by Spring Law) for the Respondents
Hearing dates: 25–27 July 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on 04 October 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
This appeal against a decision of Foxton J (“the Judge”) raises a novel issue relating to liability for dishonest assistance in a breach of fiduciary duty. The Judge ordered the second defendant, Mr Anthony Stevens, to pay sums amounting to more than £102 million as compensation for dishonest assistance together with almost £60 million in interest. Mr Stevens challenges both the compensation and the interest.
Basic facts
Most of this section of this judgment is derived from the judgment (“the Judgment”) given by the Judge on 23 February 2022. Following a hearing on 21 and 22 June 2022 at which matters arising from the Judgment were addressed, the Judge gave a further judgment (“the Consequentials Judgment”) on 4 July 2022.
In May 2003, Orb a.r.l. (“Orb”) sold the first claimant, Hotel Portfolio II UK Limited (“HPII”), to companies controlled by the first defendant, Mr Andrew Ruhan, for between £42 million and £47 million. HPII owned a portfolio of hotels, including the Kensington Palace, Kensington Park and Lancaster Gate Hotels in London (collectively “the Hyde Park Hotels”). Mr Ruhan was appointed as a director of HPII on 30 May 2003.
The potential of the Hyde Park Hotels for development into “premium residential property” had been identified even by the time Orb sold HPII. As, however, the Judge observed in paragraph 44 of the Judgment, “identifying such development potential, and realising it, are two very different things”.
On 23 December 2004, Morgan Stanley Bank International Limited (“Morgan Stanley”) and Thistle Hotels plc (“Thistle”), to each of which HPII was indebted, agreed a restructuring with Mr Ruhan as a result of which the ownership of HPII was divided equally between the three of them.
Shortly before this, on 17 December 2004, the holders of loan notes had passed a resolution authorising Mr Ruhan to accept any bid on the Hyde Park Hotels above £125 million. In paragraph 55 of the Judgment, the Judge said in this connection:
“I find that the noteholders were not in any sense dependent or reliant upon whatever views Mr Ruhan may have expressed as to the development potential of the Kensington Hotels when passing this resolution, and that the decision taken reflected the extensive professional advice received. … I am satisfied that that the decision taken to accept an offer at the stated prices reflected the extensive professional advice received, and was consistent with an objectively reasonable market valuation of the hotels (with and without planning permission) at that time.”
In a similar vein, the Judge said in paragraph 74(i):
“I am not persuaded that Mr Ruhan gave information to the other shareholders in HPII as to the value or development potential of the Hyde Park Hotels which did not fall within the range of reasonable views held at the time, and I am in any event satisfied that the various stakeholders had access to independent professional advice on these subjects, and availed themselves of it. That does not mean, however, that Mr Ruhan did not believe that there was a sufficient prospect of developing the hotels to make an attempt to explore that opportunity a worthwhile commercial gamble.”
By 23 February 2005, Euro Estates Holdings Limited (“Euro Estates”), which was linked with the second defendant, Mr Anthony Stevens, had become the sole shareholder in a company incorporated in Madeira, Cambulo Comercio e Serviços Sociedade Unipessol LDA (“Cambulo Madeira”). On 1 March 2005, a business sale agreement was concluded between Cambulo Madeira and HPII pursuant to which Cambulo Madeira agreed to buy the Hyde Park Hotels for £127 million, apportioned as to £56 million to the Lancaster Gate Hotel, as to £31 million to the Kensington Palace Hotel and as to £40 million to the Kensington Park Hotel. The £127 million was subsequently reduced to £125 million with agreement that the sale of the Kensington Palace Hotel and Kensington Park Hotel (“the Kensington Hotels”) should be completed at a price of £69 million.
The Hyde Park Hotels were vested in subsidiaries of Cambulo Madeira. Cambulo Lancaster Gate Development Limited (“CLGD”) was used for the purchase of the Lancaster Gate Hotel. Cambulo Kensington Palace Developments Limited (“CPal”) and Cambulo Kensington Park Developments Limited (“CPark”) became the owners of, respectively, the Kensington Palace Hotel and the Kensington Park Hotel.
On 30 August 2006, Cambulo Madeira sold on the Lancaster Gate Hotel (or, strictly, the shares in CLGD) to an unconnected third party for £67.5 million, realising a profit of some £7.76 million.
By then, on 4 April 2006, Cambulo Madeira, CPal and CPark had entered into a joint venture (with the project title “Trio”) with CPC Group Limited (“CPC”), a company owned by the Candy brothers, to redevelop the Kensington Hotels on a 50:50 basis. On 29 November 2007, the Kensington Hotels were transferred to a jointly-owned company, Cambulo Property Holdings Limited (“CPHL”).
On 22 February 2008, CPHL agreed to sell the Kensington Hotels to an unconnected third party for £320 million, and completion took place on 25 March 2008. CPHL used the funds to discharge loan accounts with CPal and CPark, which then made dividend payments to CPHL. CPHL in turn declared interim dividends, leading to payments of £100.2 million to CPC and £115.2 million to Cambulo Madeira. A proportion of that latter figure was paid to Wellard Limited, which had acquired a 20% interest in Cambulo Madeira. That left a profit of about £94.5 million.
On 21 December 2007, a company associated with Mr Ruhan had obtained a loan of $141 million (“the Mood Facility”) from Investec plc (“Investec”) for the purposes of a property development project which Mr Ruhan was pursuing in Qatar. The loan was secured over the shares of Euro Estates. When the interim dividends mentioned in the previous paragraph were declared, Investec was paid what it was owed under the Mood Facility, Euro Estates assumed Investec's position as lender to the Qatar Project, and further sums were committed to the Qatar Project. The result, as the Judge explained in paragraph 143 of the Judgment, was that “the entirety of Euro Estates' return from the Kensington Hotels was committed to Mr Ruhan's Qatar Project”.
HPII went into creditors' voluntary liquidation on 17 April 2008.
The Judge concluded in paragraph 214 of the Judgment that “in acquiring the Hyde Park Hotels through Cambulo Madeira, in the subsequent sale of those hotels, and in the investment of the profits, Mr Stevens was acting at all times as Mr Ruhan's nominee in the sense defined at [5] above”. The Judge had explained in paragraph 5 that HPII alleged “an arrangement in which the nominee ‘holds on trust for the beneficiary absolutely, but also agrees to do whatever the settlor/principal asks, or at least whatever is asked within a certain range of possibilities’”. Mr Ruhan did not, however, disclose his involvement with Cambulo Madeira and its purchase of the Hyde Park Hotels to HPII's other directors or shareholders at the time. To the contrary, he confirmed to Morgan Stanley and Thistle in February 2005 that he was not related to Cambulo Madeira.
The Judge said this in paragraph 269 of the Judgment about benefits Mr Stevens had received from acting as Mr Ruhan's nominee:
“I am far from satisfied that I have the full picture as to the benefits Mr Stevens derived from agreeing to act as Mr Ruhan's nominee in relation to the Hyde Park Hotels. However I am satisfied that it includes at least:
i) The sum of £500,000 paid to VTL [i.e. Value Telecom Limited, a vehicle for Mr Stevens], which even on the Defendants' own case, was paid in connection with the use of Euro Estates' shares as security for the Mood Facility.
ii) The sum of £1,000,000 ‘lent’ to Mr Stevens in August 2012 and ‘repaid’ from the £92m paid to Mr Stevens for the benefit of Mr Ruhan in November 2012. As a matter of substance, this involved Mr Stevens receiving this sum from the proceeds of the sale of the Hyde Park Hotels, which I am satisfied was in return for the assistance he provided Mr Ruhan in hiding his interest in the Hyde Park Hotels and their proceeds.”
In paragraph 249 of the Judgment, the Judge noted that HPII had:
“not sought to advance any case that:
i) it was paid less than the market value of the Hyde Park Hotels;
ii) if it had not sold the Hyde Park Hotels pursuant to the terms of the Cambulo Madeira Transaction, it would have sold the Hyde Park Hotels on more favourable terms; or
iii) it would have exploited the development opportunity presented by the Hyde Park Hotels itself.”
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Court Of Appeal Considers Remedies Against Fiduciaries And Dishonest Assistants In Cases Involving Multiple Breaches
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