Billington v Davies and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Norris |
| Judgment Date | 10 April 2017 |
| Neutral Citation | [2017] EWHC 1654 (Ch) |
| Docket Number | Case No: CH-2017-000069 |
| Court | Chancery Division |
| Date | 10 April 2017 |
[2017] EWHC 1654 (Ch)
Mr Justice Norris
Case No: CH-2017-000069
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
7 Rolls Building
Fetter Lane
London
EC4A 1NL
Mr Mather (instructed by Peters & Peters) appeared on behalf of the Claimant
The First Defendant did not appear and was not represented
(As Approved)
Fraudsters injure the innocent. The two parties to this appeal are innocent victims of frauds carried out by Mr Davies, frauds which he has chosen not to contest.
The claimant is Mr Billington. By default he has recovered judgment against Mr Davies on the footing that he is the victim of substantial property frauds perpetrated against him by Mr Davies and Mr Davies' company, Soane Capital Limited, by being induced to make substantial payments to Mr Davies for property investments which simply did not exist.
Mr Billington commenced proceedings against Mr Davies on 23 November 2015. One of the frauds he alleged related to a payment of £500,000 made by Mr Billington to Mr Davies. In those proceedings Mr Billington sought against Mr Davies (a) declarations that the sums that he had paid him, then totalling some £1.3 million, were held on trust; alternatively (b) rescission of the investment agreements (insofar as they were held to exist) and consequential orders for accounts or for damages or for equitable compensation.
Mr Billington obtained judgment in default by order of Birss J on 11 August 2016. The judgment entered in favour of Mr Billington was that Mr Davies and his company were jointly and severally liable to pay to Mr Billington the total sum of £1.716 million immediately. The order went on:
"Subparagraph (a) above is without prejudice to the claimant's entitlement to seek further proprietary relief, including by way of seeking such declarations as he may be found entitled to and the claimant shall have liberty to apply for that purpose."
There were consequential orders relating to costs and the continuation of "freezing orders".
In order to recover the judgment sum, Mr Billington obtained a final charging order against the interest of Mr Davies in a property at Leigh House, Cobham, Surrey. The Order says that the interest of Mr Davies in that asset should stand charged with the payment of £1.83 million, being the sum then due under the judgment debt.
Consequent upon the making of that Charging Order, proceedings are now on foot for an order for the sale of Leigh House. Leigh House is in the joint ownership of Mr Davies and his wife Mrs Davies. She is the other innocent party embroiled in these proceedings and their consequences.
On 11 November 2016, Mr Billington's solicitors wrote to Mrs Davies advancing a claim that she was liable to account for a sum of money out of her share in Leigh House. The circumstances were that Mr Billington had discovered that out of the £500,000 to which I have referred, a sum of £337,601 had been used to pay off a second charge on Leigh House in favour Aurora Finance. Mr Billington's solicitors argued that there was no legitimate justification to use Mr Billington's £500,000 to redeem the charge held by Aurora Finance. They said that they considered that the payment of £500,000 had been received on constructive trust and that Mr Billington was entitled to trace the £337,601 into the equity in Leigh House which it was used to redeem. They said in their letter addressed to Mrs Davies:
"We refer you to the case of Federal Republic of Brazil v Durant International Corporation (Jersey) [2015] UKPC 35."
They added that in any event they did not consider that she had any basis to assert any beneficial interest "in the equity represented by that sum" and that the charging order would take effect accordingly. At the conclusion of their letter they said that they also had a claim in respect of sums paid to Mrs Davies by Mr Davies' company "by way of wages and possibly on other alleged bases". They said that in the absence of a satisfactory explanation, they would be forced to infer that Mrs Davies had provided no consideration for those sums and was liable to Mr Billington for them. Mrs Davies made no response to that threatening letter.
Shortly thereafter on 22 December 2016, Mr Billington launched an application. There were four heads of relief sought. First, an order that Mrs Davies be added as a party to the proceedings pursuant to CPR rule 1Secondly, a declaration that Mr Billington was entitled to trace the sum of £337,601 into the beneficial interests in Leigh House. Third, a declaration that "the sums of [blank] pounds received by Mrs Davies were received on trust for Mr Billington and the third defendant", ie, Lettonhall (No.3) Limited, "should account to Mr Billington for the sum of [blank] pounds." This is a reference to the claim of wages and other sums said to have been received by Mrs Davies from Mr Davies' company. The fourth head of relief was an order that Mrs Davies do pay Mr Billington's costs of the application.
It is clear from the witness statement of Jason Woodland made in support of that application that Mr Billington was pressing for substantive relief in the form in which he had expressed it, namely a declaration that the sum of £337,601 out of any proceeds of sale of Leigh House should be accounted for to Mr Billington; and secondly, an order in relation to the unspecified sums said to be due in respect of wages and ancillary receipts.
The basis of the claim appears to be threefold. First, backwards tracing as indicated in the Republic of Brazil case to which I have referred; secondly, a claim in unjust enrichment; and thirdly, though this less clearly emerges, a claim that Mr Billington was entitled to be subrogated to the Aurora Finance second charge. It is clear from the skeleton argument at the hearing that the full relief was pressed for.
At the hearing Counsel instructed on behalf of Mrs Davies said that such an application was misconceived. He noted that Mrs Davies had been entirely detached from all of the matters hitherto raised in the proceedings. Nobody had suggested that she was party to the fraud. Counsel submitted that, if Mr Billington wished to make a claim against Mrs Davies, then she should be served with either a Part 8 claim or a Part 7 claim in the usual way, once a proper "letter before action" had been served. She could then put in a witness statement or a defence in which she would wish to advance an argument that she was entitled to rely on "the equity of exoneration". This was a reference to the decision in Re Pittortou [1985] 1 WLR 58.
The argument to be advanced was that the second charge imposed on Leigh House had been to secure borrowing that was wholly in favour of Mr Davies and his business and that accordingly insofar as Mrs Davies (as registered proprietor) had joined in a charge on the property to secure that indebtedness, she was in the position of a surety and was...
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Hotel Portfolio II UK Ltd ((in Liquidation)) v Andrew Joseph Ruhan
...of determining certain issues which would arise thereafter in relation to tracing relief and enforcement ( Billington v Davies & Ors [2017] EWHC 1654 (Ch), [24]–[27]). 25 However, the purpose of the proposed joinder in all of these cases was essentially forward looking – to allow the new p......