Case No: CR-2017-007339 the Rolls Building Fetter Lane, London EC4A
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Neutral Citation Number: [2021] EWHC 684 (Ch) Case No: CR-2017-007339 IN THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES CHANCERY DIVISION IN THE MATTER OF ONE BLACKFRIARS LIMITED (IN LIQUIDATION) A N D I N THE MATTER OF THE INSOLVENCY ACT 1986 The Rolls Building Fetter Lane, London EC4A 1NL Dated: 23 March 2021 Before : John Kimbell QC (sitting as a Deputy High Court Judge) - - - - - - - - - - - - - - - - - - - - - Between : (1) ADRIAN CHARLES HYDE Applicants (2) KEVIN ANTHONY MURPHY (AS JOINT LIQUIDATORS OF ONE BLACKFRIARS LIMITED) - and - (1) ANTONY DAVID NYGATE (IN HIS CAPACITY AS REPRESENTATIVE OF THE ESTATE OF JAMES JOSEPH BANNON, FORMER JOINT ADMINISTRATOR OF ONE BLACKFRIARS LIMITED APPOINTED UNDER CPR R 19.8(1)) (2) SARAH MEGAN RAYMENT (AS FORMER JOINT ADMINISTRATORS OF ONE BLACKFRIARS LIMITED) Respondents Simon Davenport QC and Tom Poole (instructed by Humphries Kerstetter LLP) for the Applicants Justin Fenwick QC and Ben Smiley (instructed by Mayer Brown International LLP) for the Respondents Approved Judgment Re 1 Blackfriars Ltd Mr John Kimbell QC, sitting as a Deputy High Court Judge Hearing dates: 8 – 12, 15 – 19, 24 – 26 & 30 June 2020 & 1, 2, 3, 6, 7, 8 July 2020 - - - - - - - - - - - - - - - - - - - - - APPROVED JUDGMENT - - - - - - - - - - - - - - - - - - - - Covid-19 Protocol: This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to BAILII. The date and time for hand-down is deemed to be 10.30 a.m. on 23 March 2021 . Page 2 Approved Judgment Re 1 Blackfriars Ltd Mr John Kimbell QC, sitting as a Deputy High Court Judge TABLE OF CONTENTS Section Title Paras. A INTRODUCTION 1-25 B FACTUAL BACKGROUND 26-164 C THE PROCEEDINGS 165-172 D LIST OF ISSUES 173 E WITNESSES 174-190 F THE LEGAL FRAMEWORK 191-199 G THE DUTIES OWED 200-258 H THE ALLEGED BREACHES 259-464 (i) Was there an improper agreement to a “light touch” administration? (ii) Was the appointment of CBRE appropriate and were they independent? (iii) Was there a failure by the FAs to gather and analyse sufficient information about the value of the Site? (iv) Was there a failure to gather and analyse sufficient information in order to determine which statutory objective to pursue? (v) Was there a failure by the FAs to exercise their own independent judgement? (vi) Was there a failure to investigate, pursue and obtain a varied planning consent? (vii) Should the FAs have sought to negotiate overage provisions or a conditional contract? (viii) Was there a failure to ensure the Site was appropriately marketed? (ix) Was there a failure to conduct an appropriate bidding process? (x) Sale at an undervalue. I SUMMARY OF CONCLUSIONS 465 J DISPOSAL 466-467 3 Approved Judgment Re 1 Blackfriars Ltd Mr John Kimbell QC, sitting as a Deputy High Court Judge A. INTRODUCTION 1. The Applicants in these proceedings are Adrian Hyde and Kevin Murphy. They were appointed as the joint liquidators (the ‘JLs’) of One Blackfriars Ltd (‘OBL’ or ‘the Company’) on 30 March 2016. 2. The Second Respondent and Mr Shay Bannon are the former administrators (the ‘FAs’) of the Company. They were appointed on 14 October 2010 by a syndicate of banks (‘the Syndicate’). The Syndicate was led by the Royal Bank of Scotland (‘RBS’). 3. The Syndicate provided OBL with a facility (‘the Facility’) to refinance a loan which OBL had used to purchase a plot of land at 1-16 Blackfriars Road, London SE1 9BP (‘the Site’). 4. Mr Bannon died on 12 May 2018. The First Respondent is the representative of the estate of Mr Bannon. 5. In September 2010, the Company defaulted on its obligations under the Facility and demand was made for immediate repayment of the then outstanding sum (£61.4 million). The sum was not repaid so the Syndicate appointed the FAs under a legal charge held by RBS as security for the Facility. 6. The Site was marketed on behalf of the FAs by the CB Richard Ellis Ltd. (‘CBRE’) and was ultimately sold to St. George Group PLC (‘St. George’) in December 2011. The purchase price paid by St. George for the Site was £77.4 million. 7. Having obtained permission from the relevant planning authority to vary the approved scheme previously obtained by OBL, St. George subsequently developed the Site in the form in which it exists today, namely, a 50-storey 170 m high tower containing 274 residential flats and two smaller buildings. One of the smaller buildings contains a 161 room hotel. The other contains retail units. 8. The JLs, represented by Simon Davenport QC and Tom Poole, allege that the administration of OBL was mishandled by the FAs from the outset. The JLs allege that the Site was sold at an undervalue and that, had the FAs complied with their statutory and common law obligations, OBL could have been saved as a going concern. For the 4 Approved Judgment Re 1 Blackfriars Ltd Mr John Kimbell QC, sitting as a Deputy High Court Judge reasons given in an earlier1 judgment, the JLs were not permitted to allege that the FAs had acted in breach of duty for failing to attempt a rescue of OBL as a going concern. Instead, the JLs allege that the chance of a funded rescue was lost because of other breaches of duty. This case was added by way of an amendment in August 2019. 9. The JLs’ allegations against the FAs fall under three broad headings: (1) Failure to act independently and in accordance with their legal duties (2) Failure to properly assess the value of the Site, in particular its planning potential and (3) Failure to market and sale at an undervalue. The JLs were at pains to point out that these three categories of claim were all interlinked. Alleged failure to act independently 10. The JLs allege that the FAs improperly pursued the interests of the Syndicate, who wanted in a quick disposal of the Site to clear OBL’s debt, and that the FAs paid insufficient regard to the interests of other creditors. Linked to this is the allegation that the FAs failed to inform themselves sufficiently (or in some cases at all) prior to making crucial decisions including, in particular, the decision as to which of the statutory objectives of the administration to pursue. Alleged failure to properly assess value of the Site 11. The JLs allege that the FAs: (a) failed to interrogate and understand the planning potential for the Site; (b) failed to consider or assess the valuations for the Site previously obtained by the Company before and during the administration; (c) failed to obtain their own independent valuation for the Site; and (d) failed to reconcile the disparity between the previous valuations and the strategic advice provided by CBRE to the Syndicate. Alleged sale at an undervalue 1 [2019] EWHC 1516 (Ch) 5 Approved Judgment Re 1 Blackfriars Ltd Mr John Kimbell QC, sitting as a Deputy High Court Judge 12. The JLs say that CBRE should never have been appointed to market the Site because they had previously advised the Syndicate and what marketing they did was in any event negligent. This failure, together with a deficient bidding process, they say, led to the Site being sold at an undervalue. 13. The JLs accordingly sought an examination of the FAs’ conduct of the administration under paragraph 75(3) of Schedule B1 (‘SchedB1’) of the Insolvency Act 1986 (‘IA86’) and claim compensation. Permission to bring the claim was granted under paragraph 75(6) of SchedB1 by William Trower QC, sitting (as he then was) as a Deputy High Court Judge, on 24 April 2018. The FAs’ case 14. The FAs, represented by Justin Fenwick QC and Ben Smiley, deny any breach of duty on the part of the FAs. They say that by the time the Company fell into administration the scheme for which OBL had obtained consent was no longer financially viable and OBL was hopelessly insolvent. The FAs’ case is that it was reasonable to decide to sell the Site in the interests of all the creditors. They further say that they took appropriate planning advice, from a leading planning consultant, DP9, and followed that advice by formally implementing the existing planning consent, that it was reasonable to use CBRE to market the Site and that the marketing and bidding process was properly carried out. The FAs say the Site was sold for its then market value. The form of the trial 15. The hearing of the trial took place in unusual circumstances. Because of the restrictions imposed by the Health Protection (Coronavirus, Restrictions) (England) Regulations 2020 in response to the Covid-19 pandemic, a normal trial with the parties, their legal representatives, the witnesses and any interested member of the public all physically gathered together in a court in the Rolls Building for five weeks was impossible. Having refused an application to adjourn the trial for reasons set out in my judgment of 6 April 20202, I ordered the parties to co-operate to explore what options there might be to enable the trial to proceed as a fully remote trial. 2 [2020] EWHC 845 (Ch) 6 Approved Judgment Re 1 Blackfriars Ltd Mr John Kimbell QC, sitting as a Deputy High Court Judge 16. The parties did co-operate. By the time of the second pre-trial review held on 21 April 2020 the parties had agreed a technological solution to enable the trial to proceed as a fully remote hearing. This involved the use of a hosted virtual court room accessed by Zoom, an electronic trial bundle and a live transcript.