An outstanding rates bill on a
In 2006, developers Gazeley and MetLife sold the 260,000 sq ft Mistral 260 warehouse for £28.1m to Cantabria, a company owned by Maud and a subsidiary of lender Capmark Bank Europe. Cantabria raised a £21m term loan to purchase the property, paying the balance from its resources.
The sellers and Cantabria agreed to structure the sale and purchase through Maylands Avenue Unit Trust, a Jersey-based property unit trust, in order to avoid stamp duty. They engaged Dominion Corporate Trustees and the Dominion Trust to run it.
The trustees were not responsible for the management of the property, which was carried out by a management company owned by Maud; they were given a right of indemnity out of the trust fund for all their liabilities and expenses.
Following Cantabria’s failure to repay the £21m loan, receivers sold the property for £14.63m, but there were insufficient funds to repay the secured loan in full.
In May 2009, the rating authority obtained an order for recovery against the trustees for £532,608 for unpaid unoccupied property rates and another party brought an outstanding claim for the reimbursement of rates.
An issue arose as to whether the trustees’ right to be indemnified out of the trust assets for all their expenses, including the unpaid rates bill, took priority over the bank’s security.
David Richards J ruled that the trustees’ rights of indemnity did not rank ahead of the mortgage of the property in favour of the bank.
Dominion Corporate Trustees Ltd and another v Capmark Bank Europe plc Chancery Division (David Richards J) 29 June 2010.
James Ayliffe QC (instructed by Teacher Stern LLP) appeared for the claimants; Raquel Agnello QC (instructed by LG LLP) appeared for the defendant.