Queen's Moat Houses Plc & Anor v Capita IRG Trustees Ltd
2004
CHANCERY DIVISION
United Kingdom
CORAM
- THE HONOURABLE MR JUSTICE LIGHTMAN
Areas of Law
- Contract Law
- Banking and Finance Law
- Corporate Law
- Equity and Trusts
- Property and Real Estate Law
2004
CHANCERY DIVISION
United Kingdom
CORAM
AI Generated Summary
Queen’s Moat House plc (QMH) and its subsidiary Norfolk Capital Hotels Limited sought a declaration that, under a 1983 Trust Deed securing QMH’s debenture stock due in 2020, they could withdraw the lease of the Royal Court Hotel, Sloane Square (the Sloane Property) from the security by substituting nil and paying only transaction costs. The Trust Deed defined “value” by reference to valuations and contained a proviso attributing no value to leaseholds expiring before a date 45 years after final maturity. The Sloane Property’s lease expires in 2042 and so is a short leasehold. After financial distress, default, and waivers, QMH granted fixed charges, including over the Sloane Property, by a 1994 Deed. When QMH notified withdrawal under clause 11B in January 2004, the Trustees refused unless full market value was substituted. Mr Justice Lightman held that the proviso applies to clause 11, allowing withdrawal on payment of costs only, rejected arguments that the right to require release transforms the fixed charge into a floating charge or that business efficacy disapplies the proviso, and further rejected estoppel by convention for want of convincing proof contrary to the clear terms.
Judgment
Mr Justice Lightman:
PRELIMINARY
This action is a claim by the Claimants Queen’s Moat House Plc (“QMH”) and Norfolk Capital Hotels Limited (“Norfolk”), which is one of the subsidiaries of QMH, for a declaration that upon the true construction of a Trust Deed dated the 12 th December 1983 as subsequently amended (“the Trust Deed”) they are entitled to withdraw as security from the charge created by the Trust Deed the lease of the Royal Court Hotel in Sloane Square London (“the Sloane Property”) which is vested in Norfolk. The Defendant Capita IRG Trustees Limited (“the Trustees”), which is the recently appointed replacement trustee of the Trust Deed, opposes the application.
The Trust Deed is a deed entered into by QMH (therein referred to as “the Company”) and subsidiaries of QMH to secure the issue of debenture stock by QMH which matures on the 1st October 2020. The Trust Deed contains detailed provision for maintenance of a security cover for stockholders of the value between 150% and 175% of the nominal stock outstanding (“the Relevant Security Percentage”), for topping up the security cover if the value of the security falls below the minimum 150% cover, for withdrawal of security to the extent that the value of the security cover exceeds 175% cover and (in clauses 11A and 11B) for substitution of alternative security approved by the Trustees of equal value for property charged. Clause 1 of the Trust Deed is a definition clause and in that clause there is the critically important definition of the term “value”. In a word the clause defines value as the value ascribed by a valuation subject to a proviso (“the Proviso”) that no value shall be attributed to any leasehold property provided as security if the term of the lease expires before the date that is 45 years after the final maturity of the stock in 2020. Such a leasehold is referred to as “a short leasehold”.
The lease of the Sloane Property is for a term of 65 years expiring on the 24 th June 2042 and is accordingly a short leasehold. The current security cover for stockholders provided by a portfolio of hotels is 153% of the nominal stock outstanding. This level reflects the open market value of the portfolio of hotels on a going-concern basis.
In dispute in this action is whether the Claimants are entitled under the terms of the Trust Deed to substitute nil for the Sloane Property and obtain its withdrawal from the charge subject only to paying the costs of the transaction.
The C