Alma Property Management Ltd v Richard George Crompton & Anor

Receivers may acquire a lease connected with secured property where their powers authorise acts that seem conducive to exercising a power of sale. Whether the acquisition seems conducive is principally a question of fact. Where receivers acquire a lease within their powers, they may hold it for the chargor after redemption, but their trustee duties remain distinct from their rights and obligations as tenants. A landlord’s condition for consenting to an assignment may be unreasonable where it would deprive the receivers of an indemnity and improve the landlord’s position at their expense. A beneficiary’s objection based on breach of trust must be raised in appropriate proceedings and cannot ordinarily be introduced for the first time on appeal.

The appellant freeholder owned a high-rise building containing hotel and residential premises. The building’s unusual maintenance structure depended on a common parts lease held originally by a management company. After that company was dissolved, the respondent receivers obtained a vesting order placing the lease in their names during the receivership.

After the receivership ended, the appellant sought specific performance of the repairing obligations. The receivers counterclaimed for a declaration that the appellant had unreasonably withheld consent to an assignment of the lease to a company representing the flat lessees. The High Court dismissed the claim and held that the receivers could assign without consent: [2022] EWHC 2671 (Ch). The appeal concerned whether the receivers had acted within their powers and whether the counterclaim should have succeeded.

The Court of Appeal, in the judgment of Nugee LJ with which Arnold LJ and Falk LJ agreed, dismissed the appeal.

1. Receivers’ powers. The contractual power in clause 15(4)(iv)(a) permitted the receivers to do things which seemed conducive to any power vested in them. The powers in Schedule 1 to the Insolvency Act 1986 were to be construed broadly. The receivers had power to sell the freehold under clause 15(4)(i) and/or paragraph 2 of Schedule 1. Acquiring the common parts lease was a factual matter which seemed conducive to that sale. The lease was central to the service-charge structure, and its absence created a serious defect in the value and marketability of the freehold. The receivers therefore acted within their powers. It was unnecessary to reach a final conclusion on whether paragraph 17 or paragraph 23 of Schedule 1 independently authorised the acquisition.
2. Trust and landlord-tenant capacities. Because the lease had been acquired within their powers, the receivers held it for Alma after redemption of the charge and termination of the receivership. Alma nevertheless occupied two distinct capacities: landlord and beneficiary. The landlord-tenant question was whether the condition attached to consent to assignment was reasonable. Any objection that assignment would breach the receivers’ duties as trustees was a separate trust issue, for which Alma could have sought an injunction or compensation. It had not pleaded or argued that case below and could not introduce it for the first time on appeal.
3. Consent condition and remedy. Requiring authorised guarantee agreements might have been reasonable in isolation. It became unreasonable when the receivers’ indemnity rights were taken into account, because assignment with guarantees would deprive them of the indemnity while improving Alma’s position at their expense. The receivers were therefore entitled to assign without consent. Specific performance was properly refused, since Alma could carry out the works itself and the receivers were entitled to indemnification.

• Court of Appeal (Civil Division): Appeal dismissed. The High Court’s dismissal of the claim and decision on the counterclaim were upheld.
• High Court, Business and Property Courts in Manchester: Fancourt J dismissed the claim for specific performance and declared that the receivers could assign the common parts lease without Alma’s consent: [2022] EWHC 2671 (Ch).