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In the Matter of Johnson (2014)

Summary

The discretion to vary or revoke an order under r.3.1(7) was broad, but considerations of finality required a principled exercise of discretion. It did not provide for a judge of co-ordinate jurisdiction to vary or revoke on the basis that he would have made a different order.

Facts

The applicant enforcement receiver (S) applied for orders in respect of property, the beneficial interest of which was allegedly owned by the subject of a confiscation order (J).

J had been prosecuted for fraud and money laundering offences. He was imprisoned in default of a confiscation order in the sum of £26 million. S, appointed as a receiver, had collected just four million, leaving a £22 million shortfall and £6.4 million in accrued interest. S was then appointed as an enforcement receiver. He sought to realise J's beneficial interest in a property. A portion of that property had been transferred to J's ex-wife who had then transferred it to the first respondent (X). The third respondent (H) gave evidence that he had seen an advert for that plot and paid £85,000 to purchase it from X. He claimed that he was therefore a bona fide purchaser without notice, and was entitled to the plot as it had been registered in his name. S's attempt to persuade the Land Registry to correct the register was unsuccessful. The money had been paid into X's bank account. H had agreed not to dispose of the property pending the instant proceedings. At a hearing, X was ordered to pay 60 per cent of S's costs, but that order was not to be enforced until enquiries had been made as to her ability to pay. X had become the owner of a second property. She was later imprisoned and did not respond to correspondence.

S submitted that (1) X had obtained the first property without consent so that the transaction was void with the effect that S could have disposed of it; (2) he should recover the sum that X obtained for selling the plot to H, with the judgments rate of interest; (3) those proceeds had been used to purchase the second property, which should be declared as trust property in respect of J and an order for sale under the charging order jurisdiction should be made; (4) the sums in X's account should be declared as trust property; (5) the costs order should be set aside or varied under CPR r.3.1(7), there having been a material change in circumstances with X having been unwilling to co-operate with an enquiry into her means.

Held

(1) H was a bona fide purchaser without notice. S's attempt to persuade the Land Registry to rectify the register had been unsuccessful. In the course of the instant proceedings, S had subsequently decided that there was little value in pursuing a claim against H, which would be expensive; the legal and beneficial interest in H's plot therefore belonged to H. However, the beneficial interest in the proceeds of the sale remained with J. No order would be made in respect of H's plot. (2) The beneficial interest in the proceeds of the sale of H's plot had always belonged to J. It therefore should have been paid to S under the receivership order and the later enforcement receivership order. There would be an order that X, who had received those proceeds, was liable and should pay £85,000 to S. Interest would be added at the judgments rate. (3) It was not possible to say whether X had purchased the second property with the proceeds of the sale of H's plot. There was no information that the purchase price was in the same amount, or that the sums paid from the sale of H's plot could be traced into the second property. The court was concerned that it had been asked to consider making the second property the subject of an order for sale when the application that had been issued was for a declaration that it was trust property. Having declared that X was liable for £85,000, it would be wrong to make an interim charging order and cause more problems for S. However, X had shown that she was capable of dealing with property so as to dispose of it without regard for the interests of others. Therefore there would be an order restraining her from disposing or charging the second property under normal freezing order terms until S had obtained the money for which X was liable. (4) There was insufficient information to show that the money paid to X represented monies still standing in the bank account. There was nothing to say that the account was even open. S might be able to show that with further enquiries. (5) If there had been a relevant change of circumstances, it had gone in the opposite way. The judge had been concerned about X's ability to pay, but now that she had been imprisoned she was less likely to be able to pay. The authorities made it clear that the discretion under r.3.1(7) was broad, but that considerations of finality required a principled exercise of discretion. It did not provide for a judge of co-ordinate jurisdiction to decide that he would have made a different order. The court would not therefore exercise any jurisdiction to direct a summary assessment.

Application granted

Queen's Bench Division
Dingemans J
Judgment date
31 October 2014
References

LTL 3/11/2014

Practice areas