Meretz Investments NV v ACP Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lewison,MR JUSTICE WARREN,Mr Justice Warren |
| Judgment Date | 11 December 2007 |
| Neutral Citation | [2006] EWHC 74 (Ch),[2007] EWHC 2635 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CH/2007/APP/0292,Case No: HC04C01072 |
| Date | 11 December 2007 |
[2006] EWHC 74 (Ch)
Mr Justice Lewison
Case No: HC04C01072
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
MR PAUL MORGAN Q.C AND MR PASCAL BATES (instructed by GOLDKORN MATHIAS GENTLE) for the CLAIMANTS
MR TIM DUTTON AND MR CIARAN KELLER (instructed by BERWIN LEIGHTON PAISNER) for the FIRST TO FOURTHDEFENDANTS
MR MICHAEL PRYOR (instructed by BIRCHAM DYSON BELL) for the FIFTH DEFENDANT
Hearing dates: November 28 th 29 th 30 th December 1 st 2 nd 5 th 6 th 7 th 8 th 9 th 12 th 13 th 14 th 15 th 16 th 19 th 20 th 21st
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 | 4 |
| The witnesses | 4 |
| Mr Stern | 4 |
| Mr Olsson | 4 |
| Mr Hawkins | 5 |
| Mr Tamimi | 5 |
| Initial planning and negotiations | 5 |
| Planning | 5 |
| FP and the modular system | 6 |
| Initial negotiations | 6 |
| Expected timescale | 7 |
| Funding | 7 |
| Meretz | 8 |
| The initial agreements | 8 |
| The Preliminary Agreement | 8 |
| The Introduction Agreement | 11 |
| The FP Guarantee | 13 |
| The reason for two agreements | 14 |
| The lease and the first series of charges | 14 |
| The CHAPS declaration of trust | 14 |
| The development lease | 15 |
| The FP Charge | 15 |
| The Meretz Charge | 16 |
| The NUBBH Charge | 16 |
| Car parking and management | 17 |
| NUBBH raise the role of Meretz | 18 |
| The Deeds of Priority and alterations to the initial agreements | 19 |
| The April 1999 Deed of Priorities | 19 |
| The Heads of Terms | 20 |
| The sale of the freehold and the overriding lease | 21 |
| The May 2001 Deed of Priorities | 21 |
| Another funding crisis | 22 |
| Enter Mr Tamimi | 23 |
| Mr Tamimi | 23 |
| The relationship between Mr Tamimi and Mr Ware | 23 |
| Mr Stern is informed | 23 |
| The contingency plan develops | 24 |
| Worsening relations | 24 |
| Agreement to sell Penthouse A | 24 |
| The beginnings of the contingency plan | 25 |
| Mr Tamimi gets involved in financing construction | 28 |
| Mr Stern intervenes | 32 |
| The context of the Wrap Around Agreement | 34 |
| The Wrap Around Agreement | 35 |
| Mr Tamimi's perception of the wrap around agreement | 35 |
| The immediate run up to the injunction | 36 |
| Transfer of mortgage | 36 |
| Exercise of power of sale | 36 |
| Exercise of Lease-Back Option | 38 |
| Mr Tamimi takes an assignment | 38 |
| Progress of the development | 40 |
| The actual progress of the development | 40 |
| Impediments to progress | 40 |
| Completion never taking place | 41 |
| The previous litigation | 42 |
| The debt claim | 42 |
| The injunction application | 42 |
| The assignment action | 44 |
| The forfeiture action | 45 |
| Lightman J's judgment | 45 |
| The appeal to the Court of Appeal | 46 |
| The Issues | 48 |
| The transfer of the development lease to Mr Tamimi | 49 |
| Issues relating to the Lease-Back Option | 49 |
| Benefit of the agreements | 49 |
| The economic torts | 50 |
| Cause of action estoppel issue estoppel and abuse of process | 51 |
| The strike out application | 51 |
| The different kinds of estoppel | 51 |
| The scope of cause of action estoppel | 53 |
| The scope of issue estoppel | 54 |
| The scope of Henderson v. Henderson | 55 |
| Exceptions to the rules | 56 |
| Parties and privies | 57 |
| Different capacities | 58 |
| Public interest | 58 |
| The arguments under attack | 59 |
| Cause of action estoppel | 60 |
| The debt action | 60 |
| The injunction application | 61 |
| The assignment and forfeiture actions | 61 |
| Issue estoppel | 61 |
| The assignment and forfeiture actions | 61 |
| Abuse of process | 62 |
| The injunction action | 62 |
| A rush to court? | 62 |
| Exercise of power in bad faith | 63 |
| Damages for breach of contract | 64 |
| A different date? | 64 |
| The assignment action | 65 |
| Conclusion | 65 |
| The position of the parties and the state of the account in the summer of 2002 | 66 |
| Who had interests in Albert Court? | 66 |
| The state of the account between ACP and Britel | 66 |
| The state of the account between ACP and Meretz | 67 |
| The state of the account between ACP and FP | 67 |
| Breaches of contract by ACP and FP | 67 |
| Failure to build on time | 67 |
| Failure to grant the lease-back | 68 |
| Liability to whom? | 68 |
| Mortgagee's equitable duties | 68 |
| The general principles | 68 |
| To whom are the duties owed? | 69 |
| The content of the duty | 70 |
| The mortgagee's motives | 71 |
| Protection of purchasers | 75 |
| The statutory provision | 75 |
| Limits to the protection | 75 |
| Knowledge of impropriety | 76 |
| Did FP have a power of sale to exercise? | 78 |
| Why did FP exercise its power of sale? | 78 |
| The case for Britel and Meretz | 78 |
| Financial pressures | 78 |
| Potential loss of security | 80 |
| The proof of the pudding | 80 |
| Conclusion | 80 |
| If FP exercised its power of sale for improper reasons, is Mr Tamimi affected? | 80 |
| The nature of the Lease-back Option | 81 |
| Security for Site Payments | 81 |
| Penalty | 81 |
| Void agreement to surrender | 82 |
| The effect of the transfer of the NUBBH charge | 83 |
| Does section 114 apply to a registered charge? | 84 |
| The economic torts: legal framework | 85 |
| Introduction | 85 |
| The relevant state of mind | 86 |
| Imputed intention? | 87 |
| Mistaken appreciation of law | 87 |
| Conspiracy to injure by unlawful means | 89 |
| Unlawful means | 90 |
| Interfering with contractual relations | 90 |
| Justification | 91 |
| Consent and the voluntary assumption of risk | 92 |
| Economic torts: application to the facts | 92 |
| Knowledge of the contracts | 92 |
| Consequence of exercising the power of sale | 93 |
| The state of mind of FP and ACP | 93 |
| Mr Tamimi's state of mind | 93 |
| The breaches of contract and unlawful acts relied on | 94 |
| Justification and consent | 94 |
| Causation of loss | 95 |
| Conclusion | 96 |
| Liability of directors in tort | 96 |
| General principles | 96 |
| Conspiracy cases | 97 |
| Corporate governance of ACP and FP | 97 |
| FP | 97 |
| ACP | 98 |
| Board meetings | 98 |
| Mrs Olsson | 99 |
| Conclusion | 99 |
| Result on liability | 99 |
| Loss to Meretz and Britel | 100 |
| Alternatives | 100 |
| How to choose? | 100 |
| Meretz' claimed loss | 100 |
| Britel's loss | 103 |
| Result on damages | 103 |
Introduction
This case principally concerns the effectiveness and legal consequences of a purported sale by a mortgagee of a long lease of a partially completed penthouse development on the roof of a block of flats at Albert Court, Prince Consort Road, London SW7. The two claimants, Britel Corporation NV ("Britel") and Meretz Investments NV ("Meretz") are each subsidiaries of a common parent called Lingo Corporation NV, which in turn is owned by a Liechtenstein trust. The ultimate ownership of the two companies is a partnership. Until May 2000 Britel was the freehold owner of Albert Court. Albert Court consisted of some 85 flats, sold off on long leases, and a basement garage. Meretz was the leaseholder of flat 6. Mr William Stern is the London agent for both companies; and he reports to Mr Neumann in New York. The second Defendant, First Penthouse Ltd ("FP"), was the mortgagee in question. It held a first charge over the lease and was the transferee of a second charge over the same lease. The first Defendant, ACP Ltd ("ACP"), was the leaseholder, and, at the material time, was the wholly owned subsidiary of FP. Mr Olsson is the managing director of both ACP and FP. Mrs Olsson is his wife; and for some of the time was also a director of ACP and FP. They are the third and fourth Defendants. The fifth Defendant, Mr Tamimi, was the purchaser of the lease.
Mr Paul Morgan QC and Mr Pascal Bates appeared for Britel and Meretz; Mr Timothy Dutton and Mr Ciaran Keller appeared for ACP, FP and Mr and Mrs Olsson; and Mr Michael Pryor appeared for Mr Tamimi.
The witnesses
Mr Stern
Mr Stern is highly experienced in the world of property; and is no stranger to litigation. It was he who was responsible for introducing Britel and Meretz to Albert Court. He was intimately involved in the commercial deals that form the subject of this action; although he was not (or not heavily) involved in drawing up the documentation to give effect to those deals. He is highly articulate and has a thorough and detailed knowledge of the trial papers. He also has a strong and genuinely held view that Mr Olsson is dishonest; that Mr Olsson and Mr Tamimi have defrauded Meretz and Britel; and that they are the worst kind of conspirators. His evidence was at times passionately given. He was loath to accept that it was inappropriate for him to give "evidence" which was no more than the conclusions and inferences that he (with the benefit of hindsight) drew from documents revealed on disclosure. He was free with allegations of dishonesty, corruption and impropriety. While I do not doubt that Mr Stern's opinions are genuinely held, the very strength of those opinions has, in my judgment, coloured his evidence to such an extent that I consider it unsafe to rely on it.
Mr Olsson
Mr Olsson is an engineer by training. He is the managing director of both FP and ACP. He has less of a grasp of the trial papers than Mr Stern; and took time during his cross-examination to read documents put to him. I do not consider that he did so as a stalling tactic. He was, in my judgment, an honest witness. However, although he gave his evidence carefully, I consider that some of it was reconstruction rather than real recollection. There is, I think, some force in Mr...
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