1998/93 - Dollar Land (Manhattan) Ltd v Channel Hotels & Properties Ltd [1998] UR 93 (1 May 1998)

Application by the Defendant to lift or vary an injunction in the Plaintiffs Order of Justice.

THE DEPUTY BAILIFF: On the 15 April 1998, the Bailiff signed an Order of Justice, at the request of a Company called Dollar Land (Manhattan) Limited, which caused injunctions to be imposed on Channel Hotels and Properties Limited. This company is incorporated in Jersey and has its registered office here.

The Order of Justice anticipates that the Plaintiff is likely to suffer loss and damage but does not plead an enforceable action. It claims an apparently perpetual injunction.

The Defendant now applies by summons to lift, or alternatively, to vary the injunction. The injunction is attacked on three grounds: (1) there has not been, in the Defendants view, a full and frank disclosure; (2) in any event, damages would be an inadequate remedy; and (3) the undertaking given by the Plaintiff, although now fortified by the payment of £20,000, is worthless.

Let us for a moment look at what the Order of Justice says. It shows that the Plaintiff owns valuable commercial development property in Belgium. It says that the property is mortgaged - inter alia - to Skopbank (Finland) which has three mortgages on the property, one of which is held jointly with An-Hyp Bank of Antwerp.

Because Skopbank, according to the Order of Justice, is in receivership, the mortgages are currently held by a company called GGF Asset Management SA of Luxembourg. That we now know to be incorrect.

The Plaintiff says that he is in arrears with respect to the servicing of the An-Hyp and GGF Mortgages. An-Hyp Bank of course, are the first mortgagees, and the second joint mortgage is with GGF. An-Hyp, have, according to the Order of Justice, obtained an Order from the Belgian Court enabling them to sell the property at public auction. This would not, in the view of the Plaintiff, realise a realistic price. The Plaintiff is therefore trying to negotiate a proper price with a company called Hochtief.

Quite recently, on 12 December 1997, Mr Kirch of Channel Hotels and Properties was informed of all this by Mr Stern of Dollar Manhattan. The Order of Justice then sets out that there is alleged to be a contract, and I need to recite all of paragraph 6:

"By letter addressed to Mr Kirch of the Defendant dated 17 December 1997 from Mr Stern acting on behalf of the Plaintiff, the Plaintiff offered to the Defendant the option to purchase the Mortgages from GGF, at a significant discount of 50% (the "Option"). The Option must be exercised by the 24 April 1998. The discount aforesaid was negotiated with GGF by Mr Stern. The purpose of the Plaintiff in arranging the option was to prevent An-Hyp from proceeding with the auction, given the joint mortgage with GGF aforesaid. In order further to frustrate the proposed auction, it was intended by the Plaintiff that the Defendant should also negotiate with An-Hyp for the purchase of its Mortgages with respect to the property. As consideration for the Defendant purchasing the option, the Plaintiff offered to the Defendant a premium of £500,000. The Defendant well knew the reasoning behind the Option and intended negotiations with An-Hyp.

the Defendant would purchase the Option and exercise the same;
In consideration for the Defendant purchasing the Option and the Mortgages, the Plaintiff would pay to the Defendant the value of the Mortgages, together with the costs incurred in obtaining the same and interest thereon, £5,000,000 by way of repayment of a debt owed to the Defendant by a company called Dollar Land Holdings Limited, of which Mr Stern is also a director, and the fee of £500,000 aforesaid.
The above payments are to be made upon receipt of the Plaintiff of either the first two instalments of payments for the property by a company called Hochtief or from the initial payment of any other purchaser of the Property accepted by the Plaintiff.

Accompanying that Order of Justice was an affidavit sworn on the 15 April 1998, the day the Order of Justice was signed. Perhaps if I read from paragraphs 23 to 26, it will make the matter clearer. What Mr Stern said in the relevant parts of his affidavit, is this:

The whole purpose of my proposing to Mr Kirch of CHAPS that CHAPS purchase the GGF mortgages, the sale of which I had negotiated with GGF, was to buy time in which for me to negotiate a private sale of the Property and to frustrate An-Hyps attempts to force a public sale of the Property which would achieve a price below the true market value of the site and thus obliterate any equity which DLM had in the property.
Matters proceeded as planned until the 2 April 1998 when Mr Kirch telephoned me to say that his Lawyer had been approached by An-Hyp’s lawyer in order to ascertain whether Mr Kirch, on behalf of CHAPS would be prepared to sell to An-Hyp his option to acquire the GGF mortgages. I understand that An-Hyp were very unhappy when they discovered that GGF had agreed to sell their mortgages to CHAPS, and I was informed by GGFs managing director H-J Gernert that An-Hyp had threatened GGF with litigation in respect of their agreement to sell their mortgages to CHAPS.
During our telephone conversation I tried to explain to Mr Kirch that his dealings with An-Hyp would be fatal to my interests, and would go against the purpose for which I introduced to him, the opportunity of acquiring the GGF mortgages. I reminded Mr Kirch that I had agreed to pay him a financing fee of £500,000 in relation to an outlay on his part of only 3.75million for the sole and exclusive purpose of ensuring that he warehouses the GGF mortgage, until such time as DLM will have finalised its sale negotiations with either Hochtief or another purchaser. Mr Kirch seemed little interested in my explanations and gave me the impression that he was going to ascertain what price An-Hyp were going to offer him for his option to purchase the GGF mortgages, and then he would try to get his money back as soon as possible, regardless of the consequences to DLM. I refer to my two letters to Mr Kirch written on the 2 April 1998, copies of these letters are attached as exhibits.
If CHAPS sells its option to acquire the GGF mortgages to An-Hyp, there would be no private sale of the property with the potential loss to DLM of some £30m. I respectfully do not consider this to be an appropriate case for an award for damages because of the loss of opportunity of a private sale if CHAPS sells its option to acquire the GGF mortgages to An-Hyp.

It is clear that the purpose of the transaction, in Mr Sterns eyes, was merely to warehouse the An-Hyp mortgages until he was able to arrange a private sale of the property, and therefore frustrate An-Hyp in their attempts to foreclose on the property.

CHAPS now hold the GGF mortgages, but Mr Young says - as he must if this matter is to succeed - that there is a contract between the Plaintiff and the Defendant, and that led to the situation where CHAPS now holds these GGF mortgages.

We do not wish to examine in very great detail the facts as explained in the copious affidavit evidence because the question, it seems to us, that we have to ask ourselves is: Is there, or is there not, an agreement between the parties?

On the 19 December 1997, Mr Stern sent a two page draft agreement to Mr Kirch. The first paragraph of that agreement in our view is illuminating. It says:

What did Mr Kirch do, when he received that agreement? Well he certainly did not sign it and said that he was not going to do so in certain terms. What he said was this:

"I am not prepared to sign any agreement with you over these mortgages, other than the fact that I confirm that I will only look for repayment of the mortgage and costs and interest, my £5m and the £500,000 fee. We will require payment of these sums from the first and second instalments, as we understand them, of the Hochtief offer or from the initial payment of any other offer you might decide to accept. I require you to guarantee personally and on behalf Dollar Land (Manhattan) and Remile the repayment of these monies in the manner stated".

Mr Stern confirmed that there was an agreement. His letter is interesting; he said:

If there was consensus ad idem, Mr Kirch clearly did not think so. He set out his views in a letter dated the 7 April 1998, as follows:

I only went ahead on the basis that I was not any way restricted with what I did with the mortgages if I acquired them.
I have never agreed to take An-Hyp out.
I have never agreed to give you any particular time in which to sell the property.
My letter states what I am looking for out of the transaction, which remains the same today. If you were able to place it and were able to pay me not only that mentioned on the list, but also the money due to me from the Penthouse I would be delighted, and I note there is a further meeting this week in that connection. All I can suggest, that you do not become too greedy and that you manage to achieve a sale even it if does not come up to your full expectations.
I cannot in any event see that the purchase of the GGF mortgage has done any harm to you whatsoever. It delayed the foreclosure of An Hyp, it gave you longer to try and sell the property, and also substantially reduced the amount you owe on the site, therefore you were correct in thanking me for what I had done for you, but unless you can come up with a definite offer in the very near future, I will obviously explore the options which are open to me. So that there is no misunderstanding I list some of those that are available to me.

Now that letter was not disclosed to the Bailiff. It might well have been, for the duties of those attempting to obtain ex parte injunctions are onerous. It is not in dispute that where such a draconian remedy is sought, particularly in cases such as this, which are not plain and obvious, the affidavit in support should briefly but clearly set out the facts that gave rise to the claim against the Defendant; to the claim that gives rise to the interlocutory relief; of the facts, if there are any, that justify a ex parte application.

We say that because this case in our view might well have been argued inter partes. Any likely difference that the Defendant might assert to the claim should have been made known, and indeed any facts known to the Applicant which might have led to the Court not granting the relief ex parte.

The overriding principle in all this, of course, is that the Applicant must act with the utmost good faith. Advocate Voisin supplied us with a small bundle of legal authorities, all well known to this Court, we need for these purposes only to cite from a short passage - from Alpha Print Limited -v- Alphagraphics Printshops (1989) JLR152, where the Court said this, at 157, having examined some of the local authorities:

"However, there are a number of other authorities it is useful to look at. First of all there are a number of basic principles which I have no doubt the learned Court in 1963 would have agreed with; indeed, they almost anticipate the principles laid down by the House of Lords in the famous case of American Cyanamid Co -v- Ethicon Ltd in 1974. The basic principles, which the English Courts and, I have no doubt, we follow in this kind of case, are set out in Drysdale & Silverleaf’s "Passing Off Law and Practice" (1986). The speech of Lord Diplock is summarised as follows:

Has the plaintiff shown on the evidence before the court that there is a serious question to be tried? If not, then no injunction is granted.
If there is a serious question to be tried; then the Court considers whether the damages awarded at the trial would be an adequate remedy for the Plaintiff. If so, then no injunction is granted.
If damages would not be an adequate remedy for the Plaintiff, the Court then goes on to consider if damages would be an adequate remedy for the Defendant, if so then normally an injunction will be granted.
If damages would not be an adequate remedy for the Defendant, the Court goes on to consider the factors affecting the balance of convenience. ie. which party would suffer more uncompensatable damage from the grant or refusal of the injunction.
If the balance of convenience is fairly even then it is prudent for the Court to seek to preserve the status quo.
Finally, where there is approximately equal uncompensatable damage to both parties, it is proper to look at the relevant strength of the parties substantive cases. Where one is disproportionately stronger than the other, this may swing the balance."

Now there are in this case - and we have to say it - certain matters which have disturbed us:

We found paragraphs 15/1 and 15/2 of the CVA illuminating, because they said this:

15-1 If the proposal is not approved by creditors, the alternative is almost inevitably compulsory liquidation. If the Companies are placed in compulsory liquidation, unsecured creditors would not, on valuations as at the 15 June 1995, receive any distribution on their claims.

15.2 The directors of the Companies are convinced that if liquidators are appointed it would be impossible for those liquidators to promote any form of voluntary arrangement for the benefit of creditors. This is because GE Capital would not be prepared to make any continued funding available in the context of a liquidation ; nor would any funding be made available by Holdings in such a situation. The directors do not consider it at all feasible for a voluntary arrangement to be promoted in a liquidation of the Companies.

We were given a red file just before the Court sat, by Advocate Young. This contains a supplementary affidavit, and many more documents. Advocate Voisin - correctly in our view - protested at this attempt to bring in fresh evidence, and with that view we entirely agree. We would only say this, of the last sentence on the first page of the affidavit of Mr Stern - which is not before the Court, because it was not before the Bailiff, but we could not avoid noting these words:

That should have surely been declared to the Bailiff in the light of the CVA. material which is now before the Court. We have also seen details of interest; accumulation tables which - because interest was compound, and a process not allowed in certain circumstances under Belgian Law - has meant a reassessment, but what is important about that is that apparently no interest has been paid on these substantial mortgages for a very considerable time, if at all.

The reason that Mr Kirch and his company got involved in this matter is shown in a letter sent by Mr Stern on "Piccadilly Property Management Limited" note paper to Maître Charles Donnay De Vos Te Steene, in Brussels:

"You mentioned to me the reason for which the mortgage was granted must be recited in the text of the mortgage deed. This recital should provide that Channel Hotels has lent Dollar Land Holdings PLC, the (parent company of Dollar Land ( Manhattan ) Limited,) the sum of £8.3million, that part of these sums have been applied by Dollar Land Holdings PLC to the benefit of Dollar Land (Manhattan ) Limited, and that accordingly Dollar Land (Manhattan) Limited has agreed to provide security for £5m".

There is nothing that we have seen in the present course of negotiation for the sale of property where there is an apparent current viable valuation nor indeed, from what we have seen, is there even an apparent purchaser in view. There is no mention made to the Bailiff of the negotiations with An-Hyp, which on the face of it - and were Mr Kirch alleges in his affidavit - being negotiated, not by An-Hyp but by that Bank on behalf of a named customer, a Mr de Pauw.

A contract is alleged in the Order of Justice, and not only that of course, but also a breach of that contract. It says just that at paragraph 10 :

We have already examined that letter and duly expressed our views upon it. We would say this further: if that is a threat sufficient to give an injunction, then we are surprised. We cannot, despite the manful arguments of Advocate Young, in any event see that a contract was ever established as alleged. There is, in our view, a lack of candour in the manner the injunction was obtained, and we have no doubt in our minds that the injunction cannot be allowed to stand. In an action where there appears to us to be no solution in sight which would lead to the sale of the property in the immediate future.

We would add this: CHAPS has substantial realty in this jurisdiction alone, and we feel that even if the contract had been established - which we found it was not- on the terms of the complaint of the Plaintiff, damages would have been a more than adequate remedy for this case, and accordingly we order that the injunctions be lifted forthwith.

Alpha Print, Ltd -v- Alphagraphics Printshops of the Future (UK) Ltd & Ors (1989) JLR 152

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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> 1998/93 - Dollar Land (Manhattan) Ltd v Channel Hotels & Properties Ltd [1998] UR 93 (1 May 1998) URL: http://www.bailii.org/je/cases/UR/1998/93.html Cite as: [1998] UR 93

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