Kier Regional v City & General (Holborn)
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE COULSON,The Honourable Mr Justice Coulson |
| Judgment Date | 17 October 2008 |
| Neutral Citation | [2008] EWHC 2454 (TCC) |
| Docket Number | Case No: HT-0610 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 17 October 2008 |
[2008] EWHC 2454 (TCC)
IN THE HIGH COURT OF JUSTICE
TECHNOLOGY AND CONSTRUCTION COURT
QUEENS BENCH DIVISION
St Dunstan's House
133-137 Fetter Lane
London
EC4A 1HD
The Honourable Mr Justice Coulson
Case No: HT-0610
[No 2]
Ms Hilary Stonefrost and Mr Adam Constable (1 st and 2 nd October), instructed by Messrs Taylor Wessing, for the Claimant / Applicant
Mr Nicholas Baatz QC (11 th September and 1 st October), Mr Nicholas Peacock (1 st and 2 nd October) and Mr Manus McMullan (2 nd October only), instructed by Messrs Clyde and Co, for the Defendant/ Respondent
Mr Richard Morgan, instructed by Messrs Kidd Rapinet, for the Third Parties
Hearing dates: 11 th September, 1st and 2nd October 2008
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.
A. INTRODUCTION
This is an application by Kier Regional Limited (“Kier”) to make final the interim third party debt orders granted by Akenhead J on 4 th August 2008 against Cambridge Gate Properties Limited (“Cambridge”) and Temple Guiting Manor Limited (“Temple”). There is also a cross-application by the defendant in these proceedings, City and General (Holborn) Limited (“Holborn”) for a stay of execution of the judgment given against them, and in favour of Kier, by Jackson J (as he then was) as long ago as 6 th March 2006.
Both applications are disputed and raise a number of issues, the most significant of which is the proper exercise of the court's discretion under CPR part 72 and RSC Order 47 in circumstances where:
a) The judgment debt arises out of the enforcement of an adjudicator's decision;
b) The enforcement methodology in question, namely a third party debt order, would, by its very nature, affect those who were not parties to the original construction contract;
c) The adjudicator's decision that led to the judgment debt has always been disputed and is the subject of a major arbitration due to commence on 27 October 2008.
The particular issues that arise for determination on these applications are as follows:
a) Is there a debt due and owing from Cambridge to Holborn and/or from Temple to Holborn? It is common ground that, if I concluded that there was no such debt due and owing, Kier's application must fail at that stage.
b) If there are such debts, how should the court exercise its discretion under CPR Part 72 and, in particular, what (if anything) is the relevance of the fact that the judgment debt is based on an adjudicator's decision which is challenged, and which challenge is very shortly to be the subject of an arbitration hearing?
c) If I conclude that no third party debt order should be made (either because there is no debt due and owing or because I decline to exercise my discretion in favour of Kier), should I go on to exercise my discretion in favour of Holborn's application for a stay of execution of the judgment of Jackson J pending the outcome of the arbitration?
I propose to set out in Section B below some parts of the relevant background. In Section C, I deal with whether or not there are debts due and owing from Cambridge and/or Temple to Holborn. Thereafter, at Section D below, I deal with what I consider to be the relevant principles guiding the exercise of my discretion before I go on, at Section E below, to explain how and why I have exercised my discretion in the way that I have. At Section F below, I deal with the separate application for a stay of execution under RSC Order 47. There is a short summary of my conclusions at Section G.
I ought at this stage to express my thanks to counsel for their considerable assistance. This was of particular value on the discretion issues, because it appears that this is the first time that a judgment creditor has sought a third party debt order to enforce a judgment which is itself based on the enforcement of an adjudicator's decision.
B. BACKGROUND
B1. Holborn, Cambridge and Temple
Holborn are the freehold owners of the former patent office in Southampton Buildings, London WC2 “the property”. It appears that, when they purchased the property, it divided into four separate parts: Quality Court and 10 Furnival Street, which were to be sold; and the Library/Staples Inn, which were to be developed.
Holborn obtained financing from Irish Nationwide Building Society (“Irish Nationwide”) to buy the property and carry out the development. Their original proposal was apparently set out in a letter of offer dated the 28 th March 2000 but, for reasons which remain unexplained, that letter has not been provided to the court.
On 28 th March 2000, Holborn entered into an agreement with Cambridge and Temple (the latter then called Inchflex Limited). The one page letter was signed by Mr Steinberg, a Director of both Holborn and Cambridge, and Mr Collins, a Director of both Holborn and Temple. It read as follows:
“ PATENTS OFFICE, SOUTHAMPTON BUILDINGS, LONDON, WC2
We are writing to you regarding the arrangements between us in relation to the aforementioned property in joint venture with yourselves.
The profits and losses are to be divisible as follows:-
1) City and General (Holborn) to receive the first £1m of profit (but subject to an overall profit share of 10%.
2) Cambridge Gate Properties to be entitled to 60% of profits (and/or losses).
3) Inchflex to be entitled to 30% of profits or losses.
Business Plan
It is intended that City and General should proceed to complete shareholder acquisition, with finance substantially being provided on a normal records basis by Irish Nationwide Building Society, in return for which they will be entitled to 35% of all profits realised.
The profit shares referred to above are after having provided for the lender.
For the assistance of all parties, it is intended to design a scheme, negotiate and obtain planning consent, with a view to selling Quality Court and 10 Furnival Street.
Thereafter it is intended to develop the Library and Staples Inn to provide high class offices.
On completion of the development it is intended to let on best terms reasonably obtained on the open market and thereafter sell the completed investment to enable the disbursement of profits being increased, with the option to take place at the earliest possible date.
All parties undertake to act in good faith and to maintain strict confidentiality in relation to the terms of the Agreement at all times”.
As indicated, all three companies, Holborn, Cambridge and Temple, have shared directors and can properly regarded as separate but related legal entities.
On 19 th April 2000, Holborn entered into a formal joint venture agreement with Irish Nationwide. It is unnecessary to set out in detail the terms of that agreement but I should note that:
a) Both net profits and net loss were defined by reference to the difference between “the aggregate of the income and the sale proceeds” as against “the aggregate of the purchase price and the property expenditure and the pre-completion expenditure”.
b) Clause 7(1) required the parties, as soon as practicable after completion of the development to “use all reasonable efforts to dispose of the property …”
c) Clause 9(2) required Holborn, upon the sale of the property, to have prepared completion accounts drawn up to determine the amount of net profit and/or net loss.
It appears that, in about 2001/2002, Holborn sold Quality Court and 10 Furnival Street. This led to a payment by Holborn to Irish Nationwide in accordance with the terms of the joint venture agreement. In addition, it appears that payments on account were also made by Holborn to both Cambridge and Temple, although the amount of those payments is unclear.
B2. The Building Contract and The Adjudication
Holborn engaged Kier to carry out the development of the Library/Staples Inn. It appears that the relationship between Kier and Holborn soured and, during the course of the building contract, there were a number of adjudications. Following the award to Kier of a number of extensions of time, totalling 60 weeks, by AYH, Holborn's contract administrator, Kier commenced an adjudication seeking loss and expense in consequence of the delays. The adjudicator was Mr Ellis.
On 28 th October 2004, the adjudicator provided a written decision and concluded that Holborn owed to Kier £719,295.40 by way of loss and expense, together with sundry items for fees, interest and alike. This sum was not paid by Holborn, although Kier failed to apply for summary judgment until the 17 th January 2006. The hearing of the summary judgment application took place before Jackson J on Friday 3 rd March 2006 and lasted all day. In characteristic fashion, the judge was ready to give judgment the next working day, Monday 6 th March 2006. He gave judgment in Kier's favour, and enforced the decision of the adjudicator.
It should be noted that in his judgment 1 Jackson J was at pains to point out that he saw “considerable force” in Holborn's submission that the adjudicator erred because he had failed to take into account two expert's reports on which Holborn sought to rely in support of their argument that the 60 weeks EOT granted by AYH was erroneous. However, notwithstanding this potential error on the part of the adjudicator, the learned judge concluded that “at worst, the adjudicator made an error of law which caused him to disregard two pieces of relevant evidence… that error would not render the adjudicator's decision invalid.”
The sum due in consequence of the judgment of...
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