England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		The Rolls Building 7 Rolls Buildings Fetter Lane London EC4A 1NL
		14 July 2014

1. MR JUSTICE PETER SMITH: This is an urgent application made by a number of claimants who are freeholders of a number of hotels and the application is in respect of the terms of each lease. The present application is an application for expedition of an application for summary judgment of the construction of the leases.
2. Mr Reynolds who with Mr Greenberg appears for the claimants, Ms Harrison appears for the defendant. The issue is as to whether or not the actions that the defendants have done which is to assign each of the leases to, I suspect, a nominal £1 subsidiary of the companies in the Hilton Group is something that they have done as of right under the terms of the lease or whether it is a breach of the lease. The important point from the claimant's point of view is that the present lessees' liability is guaranteed by the substantial, no doubt, holding company of the Hilton Hotel Group whereas the assignees have not proffered any such guarantee and the assignors say that either on the construction of the leases or under the provisions of the Landlord and Tenants Act, 1995, the effect of those provisions means (a) that they can assign to one parent companies in respect of each lease and (b) that the consequence is that the parent company guarantee is released and cannot be required to be reinstated.
3. The claimants seek urgent termination of this issue because of the present financial position of the company. In saying that, I do not wish to give any impression that they are insolvent, it would be quite wrong to do so but the claimants are currently in the process of negotiating a substantial re-financing of their financial picture. We well know in these courts the difficulties of such exercises that face business in the current world. It is easy to criticise banks; I am not criticising banks I am just saying that the world of finance in 2014 is very different from the world of finance it was before 2010. It is a difficult and complicated exercise and the claimants are concerned that the value of the securities that they offer in respect of their group finance will be affected by the fact that the leases are no longer guaranteed by the Hilton Group Hotel, that they are seriously concerned that it will have an ability on them to refinance their present package and consequently, might make it extremely difficult if not impossible to obtain any alternative source of finance.
4. Given the critical nature of that, they seek an early determination of what the effect of the lease means and in particular, whether or not what the defendants have done and presented them as a fait accompli without warning on 4 July 2014 is a breach of the leases or not. It seems to me applying the well-known principles as summarised by Henderson J in the case of JW Spear & Son Limited v Zynga Inc. [2013] EWCA Civ 1175, that this is a classic case where the courts have a duty to assist the parties in resolving an urgent dispute as soon as possible. Not only that, it is in my view urgent as regards the defendant because I am sure it is equally unsatisfactory for the defendants to be put in the position of their own restructuring which is what it is, is also in jeopardy. This is something which if it cannot be negotiated must be resolved quickly.
5. Mr Reynolds appeared before me and asked for a trial in the last three days of July, that is to say this term. Instead, he was offered a trial on Thursday which of course he is quite happy to accept. The reason I suggested Thursday having concluded the claimants for the reasons I have set out that they have satisfied the threshold for a speedy trial, is to take into account the nature of the case and the overriding objective and in particular, the resources in the courts and position of other parties. In that context, whilst ordinary trials take months if not years to come on. For quite a significant period now, cases when they come on have settled. I have, by way of illustration, already lost over 30 days of trial time this term alone where cases settled either the day before or within two days or so of the trial starting.
6. What is happening at the moment is that the lists are full, that when the actual cases come up for trial there is a very high settlement rate. It is well-demonstrated by my own circumstances, I am the allocated judge for interims this week and next week and the listing officer wished me to do a case out with the interims list starting on Wednesday right through to Friday. No sooner had he decided to do that on Friday that case promptly settled this morning, which meant I was taken out of the interims list to do a case which has now disappeared. This means that I have nothing in my court sitting pattern for this week, whereas the court listing pattern in the last three days in term is of course full at the moment. There is therefore spare judicial time to deal with this case this week whereas if I put the case in for the end of July, there might not be sufficient time for this case without putting another fixture out to accommodate them. That would of course be unfair to those parties and a factor which I will take into account, and it would be unfair to the administration system because the court would probably only be able to deal with that by the court bringing in deputy judges to hear something else which involves an extra expense. The most expeditious way for this case to be dealt with, bearing in mind it clearly needs to be dealt with expeditiously is to hear it on Thursday this week.
7. Ms Harrison who appears for the defendants with that firmness of advocacy which is well-known resisted that application. Of course, the overriding requires me to ensure notwithstanding attempts of the Court of Appeal to say otherwise, that I deal with cases justly particularly in relation to the parties that appear in front of me provided that does not disproportionately impact on the other facts which I have taken into account. One of the most important aspects of justice is to ensure that a party is given the fullest and fairest opportunity to present its case.
8. This is a commercial dispute between two large organisations which turns on the construction of a lease. I will have and already have a very experienced legal team in front of me and I asked Ms Harrison in response to her suggestion that it was impossible to be ready for Thursday, to explain to me why that was so. Despite a vigorous exchange between myself and her she was, with respect to her, unable to say why a financially strong client with a strong legal team cannot put together a case to deal with an issue of construction of the lease. I should say that Mr Reynolds accepts it would be impossible on Thursday to deal with peripheral issues, namely whether or not if he won his case, any parties were liable tortuously for inducing a breach of the lease and also what would be the consequential relief that might be sought once the declaration is established. All of that would have to go off to a further hearing that at least the principle of the issue would be determined.
9. I asked Ms Harrison what evidence they would need to adduce and although I was presented with a long witness statement from the claimants' solicitors, Mr Cohen, at the end of the day when one reads that, there is nothing in there in my view which does anything other than set out the appropriate background material of the documents and what has happened. Nothing in there is put in by way of the factual matrix which is being thrust upon the courts as an aid to construction of documents, but there is nothing there. Ms Harrison was unable to say what it was they needed to adduce by way of evidence. On pass-on, during the arguments I pointed out to her that in reality they could easily deal with this case in Mr Curran's witness statement by accepting all the facts in it by saying that their view as a matter of law was that the clause was not broken. I know sometimes people are nervous about doing that because of a fear that they must actually say something but it is difficult to see what else needs to be said beyond the skeleton argument and oral submissions as to what is said that the lease means.
10. There is no reason why, given the concessions made by Mr Reynolds on the material before me, the parties cannot prepare for a trial of this issue which is capable of being dealt with in a day on Thursday. There are further advantaged that would have to be taken into account. First, Mr McGee, Queens' Counsel who I suspect will appear on Thursday said in his skeleton argument that this is an important case and the loser will appeal. As first instance judges we know how much a punt in the Court of Appeal is sometimes a good investment for a loser if I can put it that way. This is however an important issue and if we look at the matter by way of timetable this case is heard at the end of July, it is quite possible the judgment at first instance will not be handed down until October because of the impact of the vacation and it follows that a challenge to that will not appear in the Court of Appeal assuming permission to appeal is given, even if expedition is allowed until some time next year. Further, if the application for permission to appeal is required to be made on paper, it is unlikely again that if that lands in the Court of Appeal in August and September that it will be considered before October. It is possible; you can write to the Court of Appeal and ask them to expedite but it does not necessarily have the same approach for expedition that the Chancery Division has. By contrast, if the case is heard on Thursday and the judgment is released reasonably quickly after that, there will be time for anybody in this term to get the appeal in the Court of Appeal and it is quite possible even to persuade the Court of Appeal if you can get in front of them during term-time to hear the matter expeditiously. That must be the interest of all parties and that relatively modest telescoping of the timeframe can produce benefits of overall satisfactory resolution of the issues by a matter of months.
11. Nevertheless, I repeat again that one of the foremost matters must be ensuring that no party comes to the court and says, "I was not given a fair opportunity to produce my case". If I am wrong, then it is quite open to the defendant to reapply to me tomorrow and if the defendants produce evidence which shows at the very least there is a prospect that they will suffer an injustice by the matter being heard on Thursday, then I will hear that most anxiously. I will, if that evidence is established to that low threshold, I am not going to go into analysing that evidence but if I receive genuine bona fide evidence then I will of course deal with that and re-adjust any hearing so as to enable that potential injustice to be avoided. I cannot stress that too much but equally, Ms Harrison well understands and I am sure her team behind her understands I will not impress me if we come up with what I called during the course of arguments, "Reverse macrocosm" which I think all the lawyers know what I am talking about. If there is something genuine, let me see it and of course show it to the claimants first and seek from them an agreement, if not you can come back to me at any time up to 3.30pm tomorrow.
12. For those reasons I am going to accede to the claimants' application and direct that the application for summary judgment to be heard on Thursday with an estimate of one day limited solely to the construction of the leases, the subject matter of the dispute. I will give the defendants liberty to serve any evidence if advised by 4.00pm tomorrow and I will require all skeleton arguments, a list of authorities, reading lists and a bundle. I appreciate the urgency of it today but I would like one bundle properly paginated and identified in the reading list by 2.00pm on Wednesday. I will also give any party liberty to apply to me on two hours' notice to the other side during the course of this week.
13. I order that today's costs be costs in the Part 24 application.