BWCI Pension Trustees Ltd v Hurst House Holdings Ltd & Ors

I have before me an application in the petition BWCI Pension Trustees Limited v, first respondent, Hurst House Holdings Limited, second respondent, Matthew R Roberts, third respondent, Neil Morrisey, fourth respondent Hospitality Holdings International Limited, fifth respondent Hurst House Larne Limited and sixth respondent Hurst House Astwick Limited.

The petitioner, the trustee company, holds shares in Hurst House Holdings and as such presented a petition based on unfair prejudice. That petition was presented on 21 January 2008 and the matter had already been the subject of an application ex parte in front of David Richards J on 18 January. The application on 18 January was presumably in the matter of an intended or proposed petition and I think indeed a copy of a proposed petition was shown to his Lordship on that day and he granted relief ex parte, as I shall later explain.

Just to flesh out briefly the relevant commercial background, the petitioners, as I say, hold shares in Hurst House Holdings ("Holdings") and that has a number of subsidiaries, all I think 100 per cent owned, but at any rate the four of those subsidiaries which have some relevance to today are 100 per cent owned and they are Astwick, Larne, Marsh and HH Hotels. Astwick owns a site at Astwick in Bedfordshire ("the Bedfordshire site"). It is to all intents and purposes its only asset. That Astwick site has been estimated as worth £3 million by the valuers Humberts but also (and I believe this is also said to derive from a Humberts' valuation) a value of some £6.7 million if developed as a superior hotel. Unfortunately though, at the moment it is charged for more than its present value. It is charged to the extent of some £3.4 million to a body called First County. So it has an outstanding negative equity as things stand. If it can be developed that negative equity will be overcome and a value will emerge, one would hope, up to the level that Humberts have indicated. That borrowing from First County is also supported by personal guarantees and a charge from the holding company, Holdings. So much for Astwick for the moment.

Larne owns a hotel called Hurst House on the Marsh, otherwise spoken of as the Welsh site. That property is leased to the Marsh company, Hurst House Hotels Marsh. They have a 25-year lease of the Welsh site. But the lease, so Humberts say, has itself no value but, linked to the freehold, that is to say Larne's property and Marsh's property together, it is thought that they have a value of some £4.86 million. However, there is thought to be the ability to sell that combination of lease and freehold to a company called NGT for £5.3 million, in other words for a sum in excess of the joint value of the freehold and the leasehold together. It is that prospective sale that is really the only asset of any value at all in the four companies that I have mentioned, including their holding company, Holdings.

Of the four that I have mentioned, the last named is HH Hotels and it is owed money by the Larne company and owes money up to Holdings. If and only if, as I understand it, the sale of the Welsh site goes forward at £5.3 million or thereabouts will money be generated such that Larne will be able to pay its intercompany debt to HH Hotels and HH Hotels would be able to pay money up to its parent Holdings. That I hope gives a very brief picture of the immediate commercial background.

Coming to the chronology, on 7 November 2007 a winding up petition was presented against Holdings. There are, as I understand it, one or more other petitions against other Hurst House companies but the most material one for immediate purposes is that against Holdings on 7 November 2007. It has been stood over on more than one occasion and when it was last in front of the court, I think on 16 April, it was described that its adjournment to 14 May (in other words, tomorrow) should be its very last adjournment. That is a straightforward winding up petition. But, as I mentioned, on 18 January, not knowing, as it transpires, of that winding up petition, the pension trustees moved ex parte in front of David Richards J. I have a copy of the petition and it is an unusual petition in terms of shareholders petitions and unfair prejudice petitions because rather than seeking, for example, a buy-out by one party of the other party's shares or some restoration to a directorship or something along those lines, it deals only with some transactions which were learned of by the petitioner and which it wished to oppose. It says at paragraph 6:

The petition it sets out briefly what the case is intended to be and says:

That comes about because the Hospitality company, which is not a company related to Holdings or otherwise related to the Holdings Group but is a freestanding company, is one that is to be controlled and is controlled by Mr Roberts. The petitioners were therefore saying in effect that, wrongly, something of prospective value to the shareholders was being taken out of the Holdings company for virtually no consideration and transferred to Hospitality, a company controlled by Mr Roberts, the moving spirit of Holdings. That was the petition and it was preceded by an ex parte injunction on 18 January granted by David Richards J. As I said, the timing was that on 18 January the ex parte application was made and an injunction was made restraining the sales of the nature explained in the petition and then on 21 January 2008 a petition was presented. That injunction has been continued on a number of occasions, for example (and this is only an example) on 28 February the matter came before Anthony Mann J when by consent the injunction was continued and one sees its form here:

Paragraph 4 said:

As I understand it, that evidence was not filed. Then the matter (and this I think was the last substantive occasion when the question of the injunction came before the court) came before Peter Smith J on 18 April 2008 and the injunction, in a rather shorter form, was continued until trial or further order. The form of it varied slightly but I need not read it out. But again there was liberty given to the respondents because in paragraph 2 it said:

It was indicated that a change of circumstances would not need to be proved. It was also ordered that:

On 6 May there was an application notice by Holdings to vary the injunction. The evidence in support of it was said to be served on 6 May but I am told that the exhibits did not arrive at the petitioner's until 7 May. On 7 May also the matter came in front of Lewison J and it was adjourned until 8 May and on 8 May the matter came before Briggs J, who indicated (and I have seen his order) that he recognised that the matter was one of some urgency and indicated to the parties that they were to have a word with the Listing Office to see if an early hearing could be arranged at very short notice and that, failing that, the matter should come on in the Applications Court. It was indicated also that if the applications judge ruled that it could not be dealt with in the Applications Court then it would have to come on in some other way.

This morning I am sitting in the Applications Court and, as it transpired, the list was fairly light, in fact very light, and so I was able to listen to this matter fairly early in the morning. It seemed to me that the first thing to do was to find out whether there truly was a case for very, very immediate urgency and that has taken the rest of the morning and until now, 2.30pm or thereabouts, of course after the short adjournment, to deal with. I have heard Miss Leahy for Holdings and Mr Thompson for the petitioner. The case is, it is said by the respondents to the petition and the applicants for an adjournment, that the particular deal which is contemplated and proposed has to go through very promptly without any further delay otherwise the companies that I have mentioned, Holdings and at least the four, Astwick, Larne, Marsh and HH Hotels, will inevitably end up in insolvent liquidation.

The nub of the transaction that is proposed is that the potentially developable and lucratively developable Bedfordshire site should move out of Astwick and the way of doing that that is proposed is that Holdings' shareholding in Astwick should be transferred to the company Hospitality, controlled by Mr Roberts, with the hope that Mr Roberts will be able to find finance which otherwise has been wanting for the development of the Bedfordshire site. So what is proposed, in other words, is inter alia a disposition by Holdings, notwithstanding the current winding up petition and notwithstanding the current unfair prejudice petition, of an asset of its own, namely, its shareholding in Astwick, to Hospitality. Also what is required as part of the proposed transaction is that £300,000 would be paid to the chargee of the Astwick site, the Bedfordshire site, as part of the bargain. If the shares in Astwick go to Hospitality and if the £300,000 is paid to First County, then there will be a form of release of the security on the Bedfordshire site and, as I understand it, there will also be a release of the security which Holdings had to give for the loan to Astwick and also a release of a guarantee given by individuals to First County.

The absolute nub of the transaction is the raising of at least that £300,000. If that £300,000 cannot be immediately raised it seems to me that the whole proposed mechanism is doomed. It was in that context that, when the parties came in front of me shortly after 10.30am, I invited them to address me on the case for extreme urgency and, as I say, that has taken some time in itself.

That £300,000 can, as it seems to me, only be raised by the sale to NGT of the Larne site at whatever price it is, £5.3 million or thereabouts. But it turns out that it was not until yesterday that draft contracts for that, albeit final drafts, were sent out to the prospective purchaser, NGT. I do not find it probable that that sale will be completed by the time the winding up petition comes back to court tomorrow. Moreover, there is no section 127 application yet in being (I do not even understand it to be drafted, let alone presented) that would be necessary to enable the disposition by Holdings to Hospitality during the currency of the winding up petition. That is quite leaving aside the not insubstantial argument on the petitioner's part that, given the relatively limited nature of the petition in this case, a lifting of the injunction represents to all intents and purposes total success on the unfair prejudice petition by the respondents to it. They would in effect get the very relief that they would wish to achieve by a successful resistance to the petition. It is true also, I suppose, that the converse is true, but I am impressed most of all by the fact that I cannot see how the £300,000 can be raised in an urgent timetable unless the sale to NGT goes ahead and, as I say, I cannot see that being completed, certainly by tomorrow.

It is a well-known limitation on the operations of the Applications Court that matters that take more than two hours should not be heard. The reason for that is twofold. Firstly, the applications judge of the day needs to keep himself free to deal with ex partes and really urgent matters that come without any foreknowledge and warning and, secondly, the applications judge has also to prepare on any given day for the applications of the very next day which he will be seeing at very short notice. When the matter came on this morning I thought I might be free to listen for a while. The estimate of a full hearing was from one side three hours and from the other side a day. So it would have been wiser on my part simply to have then said that the Applications Court could not accommodate them. Unwisely, I allowed the matter to go forward to see if a truly urgent case was made and whether a truly urgent case could be ruled upon.

In the event, having heard the parties, I am not convinced that the case is as urgent as it pretends to be in the sense that the transactions concerned which are sought to be made capable of being done cannot, it seems to me, be done without the NGT sale being completed and I repeat that draft contracts did not go out until yesterday and there is the winding up petition tomorrow. In the event also, to compound difficulties, first of all, there are eight matters in the list for tomorrow and, secondly, an ex parte application awaits hearing. This is unfortunate but it is the sort of thing that happens in the Applications Court. In the event I do not propose to embark further on the application to vary the current injunction.

I shall listen to the parties, I hope relatively briefly, about what in the circumstances is the best way ahead, but it seems to me, given that the lifting of the injunction is so closely related to the sort of relief that is sought in the petition, that the best course would be for me to direct that the petition and the application to vary the injunction should march together from here on, that directions should be given for any further evidence and directions to be given on my part indicating that the combined hearing of both of them should be treated as a matter of urgency by the Listing Office so that they can get as early a date as is truly practicable, but not a date in the Applications Court because it seems to me that over any measurable span the sort of problem that has arisen today is the sort of problem that is going to arise on almost any hearing in front of the applications judge of the day.

So having indicated that I will not vary the injunction, that in other words it continues to run until trial, as was last ordered by Peter Smith J, I will invite the parties - if they wish I can rise as they have a word together about what would be the appropriate directions - but subject to that I will hear them on the subject of directions.