The Co-operative Bank Plc v Hayes Freehold Ltd ((in Liquidation)) and Others
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Hodge |
| Judgment Date | 19 July 2016 |
| Neutral Citation | [2016] EWHC 2068 (Ch) |
| Court | Chancery Division |
| Date | 19 July 2016 |
| Docket Number | Case No: HC-2016-000674 |
[2016] EWHC 2068 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building
7 Rolls Buildings,
Fetter Lane,
London, EC4A 1NL
His Honour Judge Hodge Q.C.
(Sitting as a Judge of the High Court)
Case No: HC-2016-000674
Mr. Jonathan Gaunt Q.C. and MR. MARK SEFTON (instructed by Forsters LLP) for Deutsche Bank AG
Mr. Stephen Robins (instructed by White & Case LLP) for Sentrum Holdings Limited.
His Honour Judge Hodge QC:
This is my extemporary judgment on two applications in the course of pending litigation between Deutsche Bank AG (to which I shall refer as "Deutsche Bank") and Sentrum (Hayes) Limited (to which I shall refer as "Sentrum") and Sentrum Holdings Limited (to which I shall refer as "Holdings"), claim number HC-2016-000674.
Deutsche Bank is represented by Mr. Jonathan Gaunt QC, leading Mr. Mark Sefton (of counsel), and instructed by Forsters LLP. Sentrum is taking no part in this litigation. I am told by Mr. Gaunt this morning that a Liquidator may be appointed to Sentrum within the next seven days. Holdings is represented by Mr. Stephen Robins (also of counsel), instructed by White & Case LLP. Since 4th July 2012, Holdings has been in entirely separate ownership from Sentrum. They were associated companies prior to 4th July 2012.
By a claim form issued on 26th February 2016 by The Co-Operative Bank plc (to which I shall refer as "the Co-Operative"), the Co-Operative sought relief in relation to the validity and the effect of a purported Deed of Surrender of some commercial premises known as the Digiplex Megaplex Centre at Brookfields, Beaconsfield Road, Hayes, which had been entered into between the four defendants. They are Hayes Freehold Limited (now in creditors' voluntary liquidation, hereinafter "Hayes"), Deutsche Bank, Sentrum and Holdings. Like Sentrum, Hayes is not in the same ownership as Holdings. Again, they were in the same ownership before 4th July 2012.
The Co-Operative seeks a declaration that the purported Deed of Surrender is void and ineffective vis-a-vis itself; alternatively, an order that it be set aside. It also seeks a declaration that Deutsche Bank and Sentrum continue to be liable under covenants in a Superior Lease dated 29th June 2001 and an Underlease dated 26th February 2010 respectively. There was an alternative claim for an order pursuant to section 423 of the Insolvency Act 1986 that the purported Deed of Surrender be set aside or that such other order be made as the court should think fit for the purpose of protecting the Co-Operative's interests. It is likely that that claim will prove unnecessary. That is the underlying litigation.
On 8th April 2016, Deutsche Bank issued a Part 20 additional claim against Sentrum and Holdings. That claim sought a declaration that the Deed of Surrender was of no effect or was void and for further declaratory relief and/or an order under section 423 of the Insolvency Act 1986 that the Deed of Surrender be set aside or the court make such other order as it thinks fit. The only active defendants to the underlying claim are Deutsche Bank and Holdings. The only active defendant to the Part 20 claim is Holdings.
There are two applications before the court. The first was issued by Holdings on 10th June 2016. That application seeks an order striking out the Part 20 claim under CPR 3.4, or dismissing it summarily under CPR 24.2. On 4th July 2016, Deutsche Bank issued an application seeking permission to amend the particulars of its additional claim against Sentrum and Holdings to include a claim based on fraudulent misrepresentation and setting aside the Deed of Surrender. The application notice also sought an order for an expedited trial of the additional, but not the underlying, claim.
The evidence in support of Holdings' application is contained within a witness statement of Valerie Maria Elizabeth Walsh, dated 8th June 2016. She is a Vice-President of Portfolio Management for the Digital Group, which includes Digital Stout Holdings LLC, the present parent company, since 4th July 2012, of Holdings.
The evidence for Deutsche Bank, both in opposition to the strike-out and summary judgment claim, and also in support of the applications to amend the Particulars of Claim in the Part 20 claim and for expedition of the trial, are contained within three witness statements. They are a witness statement of Mr. Christopher James Mitchell, a retired chartered surveyor, who was on secondment as a transaction manager in Deutsche Bank's real estate department at the time of the Deed of Surrender. His witness statement is dated 3rd July 2016. Secondly, there is a witness statement of Mr. Andrew Watson, the Interim Head of Non-Performing Assets at the Co-Operative. His witness statement is dated 5th July 2016 and evidences the fact that the Co-Operative never gave its consent to the Deed of Surrender. The third, and final, witness statement relied upon by Deutsche Bank is from Mr. Jonathan Mark Henry Ross. He is a solicitor and partner in Deutsche Bank's solicitors, Forsters LLP. His witness statement is dated 4th July 2016.
Mr. Gaunt and Mr. Sefton, for Deutsche Bank, and Mr. Robins, for Holdings, have produced detailed written skeleton arguments which I had the opportunity of pre-reading before coming into court yesterday morning. I had also pre-read the statements of case, the applications, the evidence contained in the witness statements and also the Deed of Surrender which lies at the heart of the underlying claim and the additional claim.
The background can be taken from Mr. Robins's skeleton argument at paragraphs 9 through to 22. Digiplex UK Limited was the freehold owner of the property. It leased the property to Deutsche Bank by the Superior Lease dated 29th June 2001 for a term expiring on 14th September 2021. On 26th February 2010, Deutsche Bank entered into an Underlease of the property in favour of Sentrum for a term expiring on 11th September 2021. Holdings was a party to the Underlease as a guarantor of Sentrum's liabilities to Deutsche Bank. Holdings was not a party to the Superior Lease.
Pursuant to a share sale and purchase agreement dated 26th June 2012, on 4th July 2012 Digital Stout Holdings LLC purchased the issued share capital in Holdings. Under the terms of that agreement, a company then known as Sentrum Construction Management Limited, later known as Optimum Technical Construction Limited, agreed to procure the release of Holdings from liability under the Holdings guarantee.
On 18th December 2012, the freehold reversion expectant upon the determination of the Superior Lease became vested in Hayes, which subsequently became the registered proprietor of that freehold title on 10th January 2013. On 18th December 2012, Hayes (as borrower) and Sentrum (as guarantor) entered into a finance agreement and debenture with the Co-Operative as lender. Hayes charged the reversion to the Superior Lease to the Co-Operative. On the same day, a further debenture was entered into between Sentrum (as guarantor) and the bank (as lender) and the Underlease was charged to the Co-Operative. Both debentures required the consent of the Co-Operative to any dealing with or surrender of the Superior Lease and the Underlease.
On 6th August 2015, the Deed of Surrender was entered into between Hayes, Deutsche Bank, Sentrum and Holdings. Pursuant to that deed, Deutsche Bank surrendered the Superior Lease to Hayes, which accepted the surrender: see clause 2; Sentrum surrendered the Underlease to Deutsche Bank which accepted that surrender: see clause 3 of the deed; Deutsche Bank entered into a release in clause 4 as superior landlord; there was a release of the landlord under the Underlease in clause 5; and by clause 6 of the deed, Deutsche Bank "unconditionally and irrevocably" released both Sentrum, as underlessee, and Holdings, as guarantor, from any liability under the Underlease and the Holdings guarantee.
It is appropriate at this stage for me to refer to the terms of the Deed of Surrender. That is to be found at pages 196 and following of Exhibit VW1 to Ms. Walsh's witness statement. The Deed of Surrender was expressed to relate to a Superior Lease and Lease of premises known as the Digiplex Megaplex Centre, Brookfields, Beaconsfield Road, Hayes. It is dated 6th August 2015. The parties are expressed to be Hayes (described as the Superior Landlord), Deutsche Bank (described as the Landlord), Sentrum (described as the Tenant), and Holdings (described as the Tenant's Guarantor). The Recitals read as follows:
"(A) This deed is supplemental to the Superior Lease and the Lease.
(B) The Superior Landlord is entitled to the immediate reversion to the Superior Lease.
(C) The Landlord is entitled to the immediate reversion to the Lease.
(D) The residue of the term granted by the Superior Lease is vested in the Landlord.
(E) The residue of the term granted by the Lease is vested in the Tenant.
(F) The Tenant's Guarantor guarantees the tenant covenants and other obligations of the Lease.
(G) The parties have agreed that the Superior Lease and the Lease are to be surrendered in accordance with the terms of this deed."
Clause 1 (headed "Interpretation") contains definitions and rules of interpretation which apply in the deed. The terms defined are the Superior Lease, the Lease, the Lease Demise and the Superior Lease Demise.
Clause 2 is headed "Surrender of the...
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The Co-Operative Bank Plc v Hayes Freehold Ltd ((in Liquidation)) and Others
...by Holdings against Deutsche Bank, accepted Deutsche Bank's case and held that the Deed did contain an implied condition precedent; [2016] EWHC 2068 (Ch). Although the Judge's views are not determinative because they were expressed on an interlocutory basis, the conclusion was right and th......