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PropertyFriday 30 June 2023

Judgment handed down: Ensign House Limited v FEC Development Management Limited & Ors

On 27 June 2023, Mr Justice Leech handed down judgment in Ensign House Limited v FEC Development Management Limited & Ors [2023] EWHC 1563 (Ch). Joanne Wicks KC and Jia Wei Lee acted for the Claimant, instructed by Spector, Constant & Williams. Jonathan Seitler KC, Benjamin Faulkner and Francesca Mitchell acted for the First to Third Defendants, instructed by DLA Piper.

The case concerned a site known as Ensign House, 17 Admiral’s Way, Canary Wharf, London E14 9XQ (“Ensign House”). The title structure to Ensign House was complex, comprising 18 separate office suites let on long leases to 13 different Suiteholders.

The Claimant, Ensign House Limited (“EHL”),  is a special purpose vehicle belonging to the Investin group of companies. Between 2014 and 2019, EHL, with the assistance of a property agent known as Mr Terence Alford, EHL sought to negotiate terms with the Suiteholders for the acquisition of title to Ensign House. Its plan was to subsequently redevelop the site, building a multi-storey residential tower of the kind springing up all over Canary Wharf.

EHL had negotiated with the Suiteholders over several years , when in 2020, FEC Development Management Limited (‘FEC UK”), the UK subsidiary of a Hong-Kong based multinational development group, stepped forward to express an interest in acquiring EHL’s position in Ensign House. To that end, EHL and FEC UK entered into a non-disclosure agreement (“NDA”)  in January 2019, by which FEC UK agreed, among other things, to use any confidential information provided to it by EHL only for the purposes of carrying out due diligence on the transaction, and not to approach any third parties, including the Suiteholders, without EHL’s consent.

Pursuant to the NDA, FEC UK was provided with information about the proposed terms of the deals EHL had planned to strike with the Suiteholders, the title structure, and potential pitfalls and challenges in the deal. Shortly thereafter, however, FEC UK, without seeking EHL’s consent and without EHL knowing, started to negotiate directly with the Suiteholders to do its own deal with them. In that process, they were aided by Mr Alford.

FEC UK, through an SPV known as Ensign House (FEC) Limited, eventually acquired Ensign House in February 2020. EHL brought claims against FEC UK, Ensign House (FEC) Limited, FEC’s director, Mr John Connolly, and Mr Alford, alleging, among other things, a breach of the NDA, a breach of confidence, and a conspiracy between the parties to usurp a corporate opportunity which EHL had developed over many years.

The trial was heard over 21 days in November and December 2022. Mr Justice Leech awarded damages and/or equitable compensation in the total amount of £2m, as well as requiring Mr Alford to account to EHL for some £800,000 in commissions which he made in breach of his fiduciary duties. His 342-page Judgment contains much that will be of interest to practitioners in the field. His findings on the nature of fiduciary duties owed by different kinds of property agents, and the nature of negotiating damages for breaches of broad NDAs like the kind found in this case, will be of particular note to real estate and development finance professionals.

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