Notification of Judgment
Ground Rents Income Fund plc
("GRIO" or the "Company")
Notification of Judgment
Ground Rents Income Fund plc (LSE: GRIO), a listed real estate investment trust ('REIT') investing in UK ground rents, wishes to announce that a High Court judgment has been handed down in connection with the recent hearing of the case between its wholly owned subsidiary North West Ground Rents Limited ('NWGR') and Blue Manchester Limited ('BML'), a leaseholder within Beetham Tower, Deansgate, Manchester, (the 'Building') the principal freehold property asset owned by NWGR.
In the Company's 2018 Annual Report and Financial Statements details were disclosed regarding NWGR's intention to defend legal action brought by a leaseholder (as set out within the Notes to the Consolidated Financial Statements: Note 22 Other financial commitments and contingencies). Legal advice obtained at the time of approval and publication of the 2018 Annual Report indicated that no significant liability or no material irrecoverable losses were likely to arise in respect of the claim. Furthermore, the published Net Asset Value ('NAV') of GRIO as at 30 September 2018 included a write down of the Building's value to reflect the influence of the legal action and the uncertainty of its outcome.
The principal basis of the claim relates to the failure of the structural sealant on a number of shadow box units, which form part of the façade of the Building, and the question of whether or not the remedial work done to date has kept the building in good and substantial repair.
A summary of the judgment is as follows:
The court has found for BML. The Building is in disrepair and BML is entitled to an order for specific performance that permanent remedial works be designed and implemented within a period to be agreed or the subject or further order although the provisional view of the court is that this should be within 18 months from the judgment date. Hoardings, which were erected by the contractor while the initial remedial works were carried out, must be removed within a period to be agreed or the subject or further order although the provisional view of the court is that this should be within one month and BML is entitled to damages in respect of a period of 31 months when the hoardings have been in place.
NWGR was ordered to pay £250,000 on account towards BML's costs within 28 days. The final amount of costs will be determined at a future date.
In a second issue considered by the court, BML is also entitled to damages in respect of the release of dirty water into the water supply of the building due to lack of maintenance. BML is entitled to two-thirds of its costs in respect of an interim injunction it sought in connection with the water supply issue, such costs will be determined at a future date.
The damages associated with this judgment have yet to be determined in a separate hearing, for which a date has not been set.
There are a range of potential next steps which NWGR could take, which include pursuing the proceedings which it has already issued against the original contractor's insurers and the sub-contractor through existing warranties and indemnities, which, if successful, would limit any potential liabilities or irrecoverable losses for NWGR. The proceedings have been issued against the contractor's insurers because the contractor was Carillion Construction Limited, now in liquidation.
BML has also commenced action against the contractor's insurers and sub-contractor through their existing warranties.
As regards the remedial works, the scope of the trial was limited to the issue of liability for the remedial works to be completed, but not the issue of the quantification of the cost of such works. NWGR continues to seek advice on the nature of the remedial works required to comply with the judgment and their associated cost.
NWGR will evaluate what the next actions and consequences of the judgment may be. NWGR is reliant on the financial support of GRIO to finance further legal action and to comply with the judgment. The Company continues to review its own obligations in regard to NWGR and NWGR's obligations under the judgment.
The GRIO board will keep shareholders informed of progress and provide a further update as and when appropriate.
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.
Contacts:
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Ground Rents Income Fund plc |
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Simon Wombwell (Director) |
020 7499 6424 |
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Brooks Macdonald Funds Limited |
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James Agar (Head of Specialist Funds) |
020 7659 3454 |
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N+1 Singer (Broker) |
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James Maxwell / Ben Farrow |
020 7496 3000 |
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Appleby Securities (Channel Islands) Limited (Sponsor) |
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Andrew Weaver/Zim Ceko |
01534 818230 |
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