Albert Court (Westminster) Management Company Ltd v Victoria Fetaimia
| Jurisdiction | British Virgin Islands |
| Judge | Jack, J |
| Judgment Date | 05 May 2022 |
| Neutral Citation | VG 2022 HC 037 |
| Judgment citation (vLex) | [2022] ECSC J0505-1 |
| Docket Number | Claim No: BVIHC (COM) 2019/0141 |
| Court | High Court (British Virgin Islands) |
EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
(COMMERCIAL DIVISION)
Claim No: BVIHC (COM) 2019/0141
IN THE MATTER OF DONDORE INCORPORATED
AND IN THE MATTER OF THE INSOLVENCY ACT 2003
On 18 th November 2019:
Mr. John McCarroll SC and Mr. Stuart Rau of Harneys for Albert Court (Westminster) Management Co Ltd
No appearance by Dondore Inc or anyone else, but Ms. Philippa O'Sullivan of AMS Law submitted the affidavit of the supporting creditor, Mr. Richard Hitt, the sole director and sole shareholder in law of Dondore Inc
On 30 th July 2020:
Mr. John Carrington QC of Sabals Law for Mrs. Fetaimia
No appearance by Dondore Inc or anyone else
On 4 th April 2022:
Mr. Jonathan Addo and Ms. Jhneil Stewart of Harneys for Albert Court (Westminster) Management Co Ltd
Mr. John Carrington QC of Kendell Law for Mrs. Fetaimia
No appearance by anyone else
On 4 th May 2022:
Mr. Stephen Moverley Smith QC, with him Mr. John McCarroll SC and Mr. Jonathan Addo of Harneys for Albert Court (Westminster) Management Co Ltd and Harneys
Mr. John Carrington QC of Kendell Law for Mrs. Fetaimia
Ms. Lisa Walmisley of Bedell Cristin for the liquidators of Dondore Inc
Mr. Stuart Rau in person
Mr. Lewis Hunte QC and Mr. Dan Wise of O'Neal Webster for Mr. Hitt and Ms. O'Sullivan
Jack, J [Ag]: This matter first came before me on 18 th November 2019, when Albert Court (Management) Co Ltd (“Management”) applied for the appointment of liquidators over Dondore Inc (“Dondore”). Dondore's only asset is a flat in Albert Court, London, near the Albert Hall. It was at one point worth about £2% million sterling. Its current value is in dispute. This judgment gives reasons pursuant to rule 21(2) of the Court of Appeal Rules 1968 for my decision on 18 th November 2019. I n order to understand what occurred on 18 th November 2019 I have set out the procedural history. I also determine an application dated 28 th April 2022 made by Management for a seal and gag order in respect of this judgment and other relief. There is also a complaint that the intervenor (“Mrs. Fetaimia”) broke the embargo on an earlier draft of this judgment which I had circulated to the parties and interested persons.
At the hearing on 18 th November 2019, Management was represented by Mr. John McCarroll SC. With him was Mr. Stuart Rau, both then of Harneys. (Mr. Rau has since moved firms.) There was one supporting creditor, Mr. Richard Hitt, who did not appear. He claimed to be owed £1,260,130 sterling from Dondore. In his affidavit in support made on 7 th November 2019 he said: “I am the sole director and sole shareholder.” He earlier said: “I support the application.” Mr. Rau swore an affidavit on Dondore's behalf citing an email from Ms. Phillipa O'Sullivan of AMS Law, Mr. Hitt's BVI lawyers, which stated that Mr. Hitt was the 100 per cent ultimate beneficial owner of Dondore. Mr. McCarroll SC had filed a skeleton argument. In it (after dealing with various procedural matters) he said:
“11….[T]he Company has confirmed that it does not oppose the Application (as set out in the affidavit of Richard Hitt dated 8 November 2019 and its exhibit.
12. As set out in the affidavit of Stuart Rau dated 1 November 2019, the Application was made on the basis of a judgment debt for GBP 11,470.32 dated 31 May 2019 plus interest at 8% per annum.
13. The principal amount of the judgment debt of GBP 11,470.32 was paid by the Company on 18 October 2019.
14. The interest due on the judgment debt (totalling GBP 354.48 as of 30 October 2019) was not paid, and so a small proportion of the debt forming the basis of the Application remains due and owing.
15. Further, additional sums are due and owing from the Company to the Applicant, on the basis of which the Applicant continues to seek the appointment of the Proposed JLs.
16. By a lease dated 19 May 1987 (the Lease), made between Lingo Corporation N.V. (1), Albert Court (Westminster) Management Company Limited (i.e. the Applicant) (2) and Citytowns Ltd (3), the property at 5a Albert Court, Prince Consort Road, London SW7 2BH was let to the Company's predecessor in title for a term of 125 years from 25 March 1976. The leasehold title is currently vested in the Company. The Applicant is the current management company pursuant to the lease.
17. Pursuant to the Lease and an oral licence for storage space the following sums are immediately due and payable by the Company (the Additional Debts):
a. Service and Maintenance charges and rent due and payable on demand under clauses 2(1) and 3(D)(ii) amounting to GBP 10,452 and licence fees due and payable amounting to GBP 1,400. Written demands for these sums were sent to the Respondent on 30 October 2019 at the address of the leased property pursuant to clause 9(b) of the lease.
b. Legal fees incurred by the Applicant and due from the Company [under] clause 2(5) of the lease amounting to GBP 21,063.21. These costs have been incurred by the Applicant in the pursuit of proceedings in the UK for Forfeiture of the said lease and a Claim for Possession of the leased premises. A demand for payment of these sums was sent to the registered agent of the Company on 31 October 2019.
18. In total, GBP 33,269.69 remains due and owing. Interest on these sums continues to accrue.”
The total due at the date of the hearing was a small amount of interest on the judgment debt, the fresh service charges and the legal fees. There appeared to be no dispute about the first two elements (although the interest outstanding was less than the $2,000 threshold for appointing liquidators). The claim for legal fees was problematic for these reasons.
I have been since 2004 what is now a judge of the First-tier Tribunal (Property Chamber) (Residential Property), so I am familiar with landlord and tenant disputes of the type between Management and Dondore. I was well aware that there are severe restrictions on forfeiture of leases of residential property. A lease cannot be forfeited for non-payment of rent, service charges or administrative charges unless at least £350 are outstanding or have been outstanding for over three years: Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004. 1 This provision is of negligible practical relevance to service charges and administrative charges, because there are separate (and much more onerous) provisions in respect of forfeiture for non-payment of such monies. The £350 limit is only relevant to service charges and administrative charges where they have been established by a judicial decision or agreement at less than the limit, which is rare in practice. The current rent on the flat is £200 per annum payable in two instalments on Lady Day and Michaelmas.
Forfeiture for breach of a covenant other than non-payment of rent is a two-stage process: Housing Act 1996 2 section 81(1)(a) (for service charges and administrative charges) and Commonhold and Leasehold Reform Act 2002 3 section 168 (for all other breaches 4, except non-payment of rent). There are exceptions where the tenant accepts the breach: sections 81(1)(b) and 168(2)(b) respectively. Subject to these exceptions, it is only once a
There was no evidence before me that the proceedings for a money judgment had been for the purpose of later serving a section 146 notice. Generally money judgments are sought so that a debt is paid rather than for other purposes, so there seemed a question as to whether the legal fees were recoverable under clause 2(5): No 1 West India Quay (Residential) Ltd v East Tower Apartments Ltd, 6 distinguishing Freeholders of 69 Marina, St Leonards — on-Sea v Oram. 7
What I did not realise is that the legal fees (if payable at all) were not payable to Management at all. In this regard para 17.b of Management's skeleton asserts that the legal fees were payable to Management. This part of the skeleton reflects what is said in Mr. Rau's first affidavit.
The reason Management had no claim to the legal fees is this. The lessor is Albert Court (Freehold) Co Ltd (“Freehold”). By clause 2 the lessee enters covenants jointly with Freehold and Management and severally with each of them. However, this does not mean that Management has a debt claim for monies (such as rent) owed to Freehold or that Freehold has a claim for monies (such as service charges) owed to Management. (Freehold can forfeit for breach of the covenant to pay service charges to Management, but that does not give Freehold itself a freestanding claim in debt to monies owed to Management.) By clause 2(5) the lessee covenants “[t]o pay all costs [etc] incurred by the Lessor for the purpose of or incidental to the preparation and service of a notice under Section 146…” (My emphasis.) Thus only the legal fees incurred by Freehold are recoverable in debt. Management has no claim in debt for those fees, nor any claim for substantial damages for breach of the payment obligation under clause 2(5). Only Freehold has the claim. Management can make claims under the service charge provisions in respect of the legal fees incurred by both Management and Freehold: see Schedule 5 para (14). Management can then claim those legal fees back
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