South Bank Hotel Management Company Ltd v Galliard Hotels Ltd

Hearing dates: 10–12 December 2025

Approved Judgment

This judgment was handed down remotely at 10.30am on 6 February 2026 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

This appeal, from a decision of Richards J (“the Judge”), arises out of the construction of a hotel to the east side of Waterloo Bridge in London. The appeal raises issues as to whether the appellant, South Bank Hotel Management Company Limited (“South Bank”), has an arguable claim against Mr Stephen Conway, the second defendant to the proceedings which South Bank has brought; whether any such claim is statute-barred; whether South Bank can claim damages from the first defendant to its proceedings, Galliard Hotels Limited (“Hotels”), for breach of leases of rooms at the hotel or whether, as the Judge thought, any such claim is statute-barred; and as to the implications of the fact that a lease and underlease purportedly entered into in respect of an annex to the hotel by (in the case of the lease) Hotels and the fourth such defendant, Lodgeshine Limited (“Lodgeshine”), and (in the case of the underlease) Lodgeshine and South Bank were not executed on behalf of Hotels and Lodgeshine in accordance with section 44 of the Companies Act 2006 (“CA 2006”).

Basic facts

This section of this judgment is principally derived from the Judge's judgment ( [2024] EWHC 2484 (Ch)) (“the Judgment”).

The three corporate defendants to South Bank's proceedings, namely, Hotels, Lodgeshine and Galliard Homes Limited (“Homes”), all belong to the same group. Mr Conway was a co-founder of the group and is its executive chairman.

We were provided by the parties with a group structure chart as at June 2008. It can be seen from this that Hotels and Lodgeshine were both wholly-owned subsidiaries of Homes which was itself wholly owned by Galliard Holdings Limited (“Holdings”). Mr Conway was the sole director of Hotels and Lodgeshine and also one of the directors of Homes and Holdings. There were three further members of Homes' board and two additional individuals were on Holdings' board.

The Judge recorded that Mr Conway owned 47.68% of the shares in Homes with the other shares being held by members of his family indirectly through a company incorporated in the Isle of Man (paragraph 161 of the Judgment). While the Judge did not spell this out, Mr Conway and his family must have derived these interests via Holdings as the sole shareholder in Homes.

By 2004, Hotels was the freehold owner of a site in Addington Street, in London SE1 (“the Site”). At the time, the Site was used as a car park, but planning permission had already been obtained for development. On 7 October 2003, permission had been granted to construct a 300-room hotel with “additional stand alone offices or consultation room”. The Judge said this about that plan in paragraph 37 of the Judgment:

“The 300 Room Proposal thus included a ‘bolt on’ Annex pulled away at ground level from the proposed Hotel to allow a through access to the GLIH [i.e. ‘General Lying-In Hospital’] service yard. The first and second floors of the Annex would sit over that access way and be identical in height and similar in appearance to the adjacent GLIH. The Annex would have its own entrance from the street and would, in appearance, be a separate building from the main Hotel and, while the Annex and the Hotel abutted each other at the level of the first and second floor, there was no internal access between the two buildings at either such level. Even at the first and second floors where the Annex and Hotel abutted each other, the floor levels and ceiling levels were different …. The Annex was envisaged to have a separate postal address and would have sewerage connections separate from those of the Hotel. That said, the basement of the Hotel would extend under the Annex with the result that, if a freehold interest in the Annex was ever disposed of separately from the Hotel, it would be, in the jargon of property lawyers, a ‘flying freehold’.”

On 19 February 2004 Hotels obtained permission for a varied scheme under which the hotel would have 394 rooms. The consent was conditional on the hotel being used only for Class C1 user and the annex being used only for Class B1 or D1 user.

Mr Conway had conceived the idea of financing the development of the Site in part by “selling” individual hotel rooms in the hotel. Investors would enter into contracts under which they would make payments to Hotels in exchange for the latter agreeing to grant them leases of rooms in the hotel once it had been built. For the first five years after taking such leases, investors were guaranteed a 6% return on what they had paid. Once these guarantees had expired, investors were to assume the full risk and reward as shareholders in South Bank.

Mr Conway's plan involved South Bank, of which he was the sole director until 2015, becoming responsible for management of the hotel. It was to be another wholly owned subsidiary of Homes for five years after the hotel had opened, but investors were then to be issued with one share in the company for every room they held in the hotel with the result that it ceased to be a member of the Galliard group. Further, the freehold was to be transferred to South Bank.

The Judge explained as follows in paragraph 4(vi) of the Judgment:

“Promotion of this investment to Investors started in 2004. At that time, it was recognised that Investors had a legitimate interest in knowing that, when they signed their Room Contract, there was a binding contract in place for the future transfer of the freehold interest. To that end, on 24 February 2004, Galliard Hotels entered into a freehold sale contract (the ‘FSC’) with [South Bank] providing for the freehold in the Site to be transferred to [South Bank] for a consideration of £1. At the time of the FSC, [South Bank] was a member of the Galliard group and therefore the FSC was an entirely intra-group arrangement. However, … the FSC was entered into in contemplation of arrangements which would culminate in [South Bank] leaving the Galliard group and being wholly owned by Investors.”

Initially, “the focus of Galliard's marketing efforts was on the Rooms with the result that Mr Conway did not consider whether title to the Annex would or would not pass to [South Bank]” (paragraph 52(i) of the Judgment). However, in 2005 the Park Plaza hotel group agreed to become the hotel's operator, “indicated to Mr Conway that … it would wish to locate certain communal facilities in the Annex”, and “came to believe that the Hotel would also benefit from additional conference facilities on the upper floors of the Annex” (paragraphs 103–105). Mr Conway's discussions with Mr Boris Ivesha of Park Plaza “resulted in a change in the way that [he] viewed the Annex” (paragraph 111). The discussions showed Mr Conway that “(i) the Annex now needed to be used as part of the Hotel; (ii) Galliard was being put to expense in consequence; and (iii) Investors would obtain some benefit from that expense” (paragraph 111).

As the Judge explained in paragraph 114 of the Judgment, “[t]he proposal to use the Annex as part of the Hotel necessarily required a change of use application to be made to Lambeth since both the 300 Room Permission and the 394 Room Permission were conditional on the Annex being used in Class B1/D1 which was inconsistent with its use as part of the Hotel”. In early 2005, Hotels had applied for permission for an amended scheme with 396 hotel rooms and a considerable extension to the basement of the hotel. In September 2007, Hotels applied for retrospective planning permission for a hotel with 398 rooms, the extended basement and the changes which Mr Ivesha had requested (including Class C1 user of the annex).

Development of the hotel achieved practical completion on 19 December 2007, but Galliard continued to market rooms until the summer of 2008 (paragraphs 120 and 355 of the Judgment). The investors were granted leases of their hotel rooms (“Room Leases”) between January and July of 2008.

By then, what the Judge termed the “Annex Lease Scheme” had been carried into effect. This involved Hotels granting Lodgeshine a 999-year lease of the annex at a peppercorn rent (“the Lease”) and Lodgeshine entering into a 15-year underlease with South Bank (“the Underlease”). Under the Underlease, no rent was to be payable for the first five years, but there was then to be rent of £117,382.50 a year, index-linked. The Lease and Underlease were both dated 16 June 2008 and both were registered at HM Land Registry on 7 July 2008.

The Judge said this about the implications of the Annex Lease Scheme in paragraph 160 of the Judgment:

“Later in this judgment I explain why, at the time of the Annex Lease Scheme, on a true construction of the FSC, [South Bank] had a contractual right to a transfer of the entire freehold interest in the Site, including the Annex....