Court of Appeal rules in £1.3m rates row over Glenn Maud property

Jersey-based asset manager Dominion Corporate Trustees has lost an appeal against a High Court ruling that it must pay an outstanding rates bill on a Hemel Hempstead warehouse. The property, part-owned by Glenn Maud, was previously used to rehouse tenants who were affected by the Buncefield oil depot disaster in 2005. The trustees claimed that their right to be indemnified for the £1.3m liability for unoccupied property took priority over the security enjoyed by lender Capmark Bank Europe under a debenture over the property. The Court of Appeal disagreed. 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 Capmark. Cantabria raised a £21m term loan to purchase it. The sellers and Cantabria agreed to structure the sale and purchase through Jersey-based Maylands Avenue Unit Trust, in order to avoid stamp duty. They engaged Dominion Corporate Trustees and the Dominion Trust to manage the property. The trustees were given a right of indemnity out of the trust fund to cover their liabilities and expenses. Lord Neuberger MR said that the trustees, as registered freehold proprietors of the property, had incurred a liability for unpaid unoccupied property rates in excess of £1.3m, and sought an indemnity. However, following Cantabria’s failure to repay the £21m loan, receivers sold the property for £14.63m in February 2010. Lord Neuberger MR said that, as a result, there are insufficient funds to repay the secured loan in full, even without taking into account the trustees’ claim to be indemnified in respect of the rates. He said that the issue before the court was whether the trustees’ right of indemnity takes priority over the bank’s security under the debenture. In supporting the High Court ruling of David Richards J that it does not, he rejected the trustees’ argument that a clause in the debenture gave priority to their rights of indemnity. He also declined to rule that there should be an implied term in the debenture in the trustees’ favour. Dominion Corporate Trustees Ltd and another v Capmark Bank Europe plc Court of Appeal (David Richards J) 1 February 2011. James Ayliffe QC (instructed by Teacher Stern LLP) appeared for the claimants; Raquel Agnello QC and Philip Hinks (instructed by LG LLP) appeared for the defendant