ON APPEAL FROM
THE HIGH COURT OF JUSTICE , CHANCERY DIVISION
MR JUSTICE DAVID RICHARDS
Case No HC09C04866
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE RICHARDS
LORD JUSTICE HUGHES
| (1) THE TRUSTEES CORPORATE TRUSTEES LIMITED
(2) THE TRUSTEES TRUST LIMITED
|- and -
|CAPMARK BANK EUROPE PLC
Raquel Agnello QC and Philip Hinks (instructed by Lawrence Graham LLP) for the Respondent
Hearing date: 31st January 2011
Crown Copyright ©
The Master of the Rolls:
The Trust Instrument
"The Trust Fund shall be constituted out of the proceeds of issues of Units in accordance with this Trust Instrument. All cash and other property for the time being held by the Trustees pursuant to this Trust Instrument … shall be held as a single common fund (the 'Trust Fund') upon trust for the Holders [of the] Units … subject to the provisions of this Trust Fund. The Trust Fund shall be applied and otherwise dealt with by the Trustees in accordance with the provisions of this Trust Instrument. …"
a) "Charged Assets":
"the assets and undertaking of [the Trustees] from time to time mortgaged, charged or assigned (or intended to be mortgaged, charged or assigned) by way of fixed and/or floating security as security for the payment or discharge of all or any part of the Secured Liabilities, and 'Charged Asset' shall be construed accordingly".
b) "Secured Liabilities":
"all present and future obligations and liabilities, whether actual or contingent and whether owed jointly or severally and whether as principal or as surety or in any other capacity whatsoever, of [the Trustees] to [the Bank] under or in connection with the Finance Documents (including this Deed) ..".
"a mortgage, charge, security assignment, pledge, lien or other encumbrance security interest securing any obligation of any person or any other agreement or arrangement having a similar effect ..".
d) "Trust Fund" had the meaning given by clause 2.1 of the Trust Instrument.
e) "assets" had a wide meaning, including "undertaking, assets, accounts, revenue, and rights of whatsoever nature … and every kind of interest …".
"11.1 Any monies received by [the Bank], any Receiver or any administrator after this Deed has become enforceable shall be applied in the following order of priority …:
11.1.1 in satisfaction of or provision for all costs and expenses incurred by [the Bank], any Receiver or any administrator and of all remuneration due to any Receiver or administrator;
11.1.2 in or towards payment (in the order specified in … the Facility Agreement) of the Secured Liabilities or such part of them as is then due and payable; and
11.1.3 in payment of the surplus (if any) to [the Trustees] or other person entitled to it.
11.2 Clause 11.1 overrides any appropriation made by the [Trustees]."
"Notwithstanding any other provisions of this Deed:
17.6.1 [The Trustees have] executed this deed solely in [their] capacity as trustee[s] of and with the intention of binding the assets of the Unit Trust … from time to time (the 'Trust Assets');
17.6.2 the aggregate of all liabilities of [the Trustees] under this Deed shall at all times and for all purposes extend only to the Trust Assets;
17.6.3 in no circumstances shall any liability attach to or be enforced or enforceable against the assets of [the Trustees] (held in their capacity as trustees of any other trust or in their personal capacity or in any other capacity whatsoever) other than the assets which comprise the Trust Assets; and
17.6.4 all representations, warranties, undertaking, obligations and covenants in this Deed are made, given, owed or agreed by or in relation to the Trust Assets and in [the Trustees'] capacity[y] as trustees of the Unit Trust and, for the avoidance of doubt, shall not be construed to be made, given, owed or agreed by or in relation to [the Trustees] in their capacities as trustees of any other trust or in their personal capacity or in any other capacity whatsoever (other than in their capacities as trustees of the Unit Trust)."
Summary of conclusions
The Trustees' first argument: clause 17.6 of the Debenture
The Trustees' second argument: an implied term
"46. It is not difficult to accept the proposition that the circumstances in the present case are such that the parties might reasonably have agreed that the Trustees' lien should rank ahead of the mortgage. But in my judgment the circumstances are not such as to permit or require such a term to be implied.
47. There are a number of reasons for this. First, it would in my view contradict clause 11 of the Debenture, which is directly in point as the sale of the property was effected by receivers. Clause 11 requires the receiver to apply the proceeds, after payment of his own expenses and remuneration and the Bank's costs and expenses, in or towards payment of the secured loan. Only the balance, if any, is paid to the Trustees. Secondly, if there were to be some protection for the Trustees' position, it is far from obvious that it would be by giving priority to their lien. A lender might well say that such protection should take the form of a right of indemnity against the beneficial owners of the property … . Thirdly, the very fact that no provision is made for the Trustees' lien to take priority is a significant factor against its implication. As was said by Lord Hoffmann in AG of Belize v Belize Telecom Ltd  1 WLR 1988 at para 17:
'The question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs. The most usual inference in such a case is that nothing is to happen. If the parties had intended something to happen, the instrument would have said so. Otherwise, the express provisions of the instrument are to continue to operate undisturbed. If the event has caused loss to one or other of the parties, the loss lies where it falls.'
48. Among the circumstances of the arrangements on which the Trustees relied in support of an implied term for priority of their lien, they particularly stressed that the terms of the Trust Instrument had been the subject of negotiation and agreement by the bank. The Trust Instrument conferred the Trustees' rights of indemnity and lien, without the requirement contained in a number of the other clauses conferring rights or powers on the Trustees for the Bank's prior consent. If anything, this seems to me to tell against an implied priority of the lien over the mortgage. It demonstrates that the question of the Trustees' expenses was considered, but nonetheless no provision for priority was included in the Debenture."