July 19
The claimant was the current freeholder of a prominent high-rise building, partly used as a hotel and partly as residential flats let on long leases. The structure of leasehold interests in the building was an unusual one, under which the responsibility for carrying out repairs to the building was that of the lessee of a lease of the common parts. The current holders of that lease were the defendants, two insolvency professionals who had been appointed receivers of the freehold of the building pursuant to a charge, and who acquired the common parts lease in the course of their receivership. The charge over the freehold had long since been redeemed, and the receivership had come to an end. The receivers had been left holding the lease. The claimant brought an action for specific performance of the repairing obligations in the common parts lease. The receivers counterclaimed for a declaration that the claimant had unreasonably refused its consent to an assignment of that lease because it had made the assignment subject to each of the receivers entering into an authorised guarantee agreement. The judge dismissed the claim for specific performance, and gave judgment for the receivers on their counterclaim on the grounds, inter alia, that the receivers had acquired the common parts lease in exercise of their powers as receivers, and hence as agents for the claimant; that they were entitled to be indemnified by the claimant; that it was inappropriate to order specific performance of the repairing obligations against them; and that as the receivers were entitled to be indemnified as lessees of the lease against liability on the tenant’s covenants, but would not be entitled to be indemnified if they assigned the lease and entered into guarantees, the guarantee agreement was unreasonable and the receivers were entitled to assign the lease without consent. The claimant appealed, contending, inter alia, that (1) the judge had been wrong to conclude that the receivers had been acting within their powers when they sought and obtained the vesting order and (2) since on redemption of the charge and discharge of the receivership the receivers became bare trustees for the claimant, they had had no business disposing of the common parts lease, or seeking consent to assign, in breach of their duty as trustees under section 11 of the Trusts of Land and Appointment of Trustees Act 1996, so that the counterclaim should have been dismissed.
On the claimant’s appeal—
Held, appeal dismissed. As to the first issue, on analysis, the receivers had been acting within their powers when they sought and obtained a vesting order in respect of the common parts lease, since it fell squarely within clause 15(4)(iv)(a) of the conditions of the mortgage agreement as a thing which seemed to them conducive to the sale of the building. It was not necessary in those circumstances to give any further consideration to paragraphs 17 or 23 of Schedule 1 to the Insolvency Act 1986. As to the second issue, the case before the judge had been run as a dispute between landlord and tenant, not a dispute between trustee and beneficiary. The question for the judge had been whether the claimant’s requirement that the receivers entered into guarantees was reasonable or not. He concluded that it was unreasonable. That decision was not wrong. It was no answer to that decision for the claimant to say that had the case been run differently, the judge might not have granted a declaration at all because the receivers had had no business assigning the lease given their position as trustees. It was too late to seek to articulate that alternative case for the first time on appeal (paras 6, 49, 57–59, 60, 61).
Timothy Dutton KC (instructed by Walker Morris LLP, Leeds) for the claimant.
Adam Rosenthal KC and Mark Galtrey (instructed by Wedlake Bell LLP) for the defendants