Standard Life Assurance, the former freehold owner of London’s main divorce courts, today launched a £7million-plus damages claim against the Topland Group, alleging that Topland hatched an “unlawful conspiracy” to buy the building in 2003.
Standard Life claims that Topland “bribed” LSM Professional – the agents appointed by the Department for Constitutional Affairs to negotiate a lease extension in order to keep the courts at First Avenue House, High Holborn – to keep the epartment’s intentions to stay secret from it, so that it would sell the property for £58m.
It says that on the same date as the sale went through, 1 October 2003, Topland agreed a regeared lease with the department extending it by almost 27 years until September 2038 and immediately increasing the property’s value by £7.7m.
Standard Life is now seeking to recover that £7.7m figure, plus interest.
Ian Gatt QC, opening the case for Standard Life, said that the purchase and regearing of the lease was described by Topland in contemporaneous documents as a “cunning plan”.
However, he continued: “Standard Life claims it was the result of an unlawful conspiracy hatched between Topland and LSM.”
He said that Topland paid a 1% introduction fee of £580,000 in order to meet Andrew Smith, who was acting for LSM on behalf of the department, adding: “Standard Life’s case is that it was a bribe.”
He added that, on top of the immediate capital profit of £7.7m on the value of the property, the new terms of the lease included an annual rent uplift of 2.5%. He said that, although the initial rent actually went down from £3.835m per year to £3.65m, Topland had purchased the property with the benefit of a £50m loan with a fixed interest rate that costs them only £3.393m per year. As a result, he said that Topland secured a £256,000 rental profit in the first year and now, nine years on, its rental excess is as high as £1.457m and increasing each year.
Standard Life’s claims are wholly denied by Topland, which claims that it was brought in by LSM as a “white knight” in order to rescue the department from being held to ransom by Standard Life as the clock ticked down on the original lease of First Avenue House, which was due to end in March 2012.
The court heard that the Serious Fraud Office had investigated the transaction, but decided not to bring any prosecutions.
Last month, the Secretary of State for Justice reached a settlement with the Topland Group, in an action which was intended to be heard alongside this one.
The Secretary of State had claimed more than £22.8m on from Topland alleging that the transaction had enabled it to push the rent at First Avenue House significantly above market rent, but the case was settled on confidential terms.
LSM is now in liquidation and has played no part in either action.
The trial is scheduled to last until 11 July.
