Commissioners of Inland Revenue v Hoogstraten
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DILLON,SIR ROGER ORMROD,LORD JUSTICE STEPHENSON |
| Judgment Date | 29 March 1984 |
| Judgment citation (vLex) | [1984] EWCA Civ J0329-2 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 84/0134 |
| Date | 29 March 1984 |
[1984] EWCA Civ J0329-2
Lord Justice Stephenson
Lord Justice Dillon
and
Sir Roger Ormrod
84/0134
1980 I No. 5308
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(SIR NEIL LAWSON, SITTING IN CHAMBERS
AS A JUDGE OF THE HIGH COURT)
Royal Courts of Justice
MR. MARK STRACHAN (instructed by Messrs. Theodore Goddard & Co, Solicitors, London EC1A 4EJ) appeared on behalf of the Defendant (Appellant)
MR. R. NEILL (instructed by Messrs. Frere Cholmeley & Co, Solicitors, London WC2A 3HH) appeared on behalf of the Sequestrators
MR. I.B.GLICK (instructed by The Solicitor of Inland Revenue London WC2R 1LB) appeared on behalf of the Plaintiffs (Respondents)
The main appeal now before us in an appeal by the defendant, Mr. Hoogstraten, against a part of an order made on 14th July, 1983, by Sir Neil Lawson, sitting as a Judge in Chambers in the Queen's Bench Division. By that part of his order, the subject of this appeal, the judge ordered that upon the passing of their final account and upon the payment to the defendant of any balance found due to him after taking such account, certain former sequestrators be released and discharged from all liability in respect of their office as commissioners of the sequestration.
In order to understand how that order came to be made and why it is said to be wrong, it is necessary to go in some detail through the tangled history of this litigation.
By the writ of summons in this action, which was issued on 5th August, 1980, the plaintiffs, the Commissioners of Inland Revenue, claimed against Mr. Hoogstraten a sum in excess of £2,500,000 for unpaid capital gains tax, income tax, national insurance contributions (Class 4) and interest. The statement of claim indorsed on the writ showed that the sum claimed represented the aggregate sum due under a considerable number of assessments, which I understand to have been estimated assessments, made on Mr. Hoogstraten, which had become binding on him because he had not appealed against them.
On the same day, 5th August, 1980, the Commissioners of Inland Revenue obtained ex parte a Mereva injunction against Mr. Hoogstraten restraining any disposition of his assets up to the amount claimed in the writ, in excess of £2,500,000. The terms of the Mareva injunction were slightly varied by subsequent orders, but the details of the variations are not for present purposes relevant. On the information before us the making of the Mareva injunction was amply justified.
Mr. Hoogstraten served a defence in January 1981 in which he put the Commissioners to proof of the making of the assessments relied on and denied that the assessments had been served on him. But for many months thereafter nothing further happened in the action; this was because the Commissioners were primarily concerned to find out Mr. Hoogstraten's actual income and taxable gains, if they could, and to tax him on the actual figures rather than to enforce the estimated assessments even though they were in law binding on him.
At a later stage, however, the Commissioners learned that Mr. Hoogstraten had made certain dispositions of his property in breach of the Mareva injunction. He had granted long leases, in late August 1980, on four properties at Hove to a company called Thatcher Ltd., which was in truth, as now appears, a company under his control although that fact was not readily apparent. We do not know what Mr. Hoogstraten's object was in making these grants to Thatcher Ltd. The consequence, however, was that on 1st December 1981, the Commissioners issued a notice of motion for the committal of Mr. Hoogstraten to prison for contempt of court, alternatively for the sequestration of his property.
That notice of motion came before Mr. Justice Mais for effective hearing on 15th December, 1981, and after one and a half days' contested hearing it was adjourned to 22nd February, 1982, to enable Mr. Hoogstraten to file further evidence. When the parties came back to the court on 22nd February, however, discussions took place between them and agreement was reached. Mr. Hoogstraten admitted, on 22nd February, that he had acted in breach of the Mareva injunction in granting the leases to Thatcher Ltd., but he submitted, and this has never been disputed, that he had purged his contempt and done all he could to put matters right by arranging for Thatcher Ltd. to surrender the leases to himself. The Commissioners agreed not to seek the committal of Mr. Hoogstraten to prison, while he agreed to submit to the sequestration of all his property. An order was accordingly made by Mr. Justice Mais on 22nd February, 1982, to which I shall have to refer. I have no doubt that the objects of the Commissioners in obtaining that order were to find out the full extent of Mr. Hoogstraten's assets and his true tax liabilities and to ensure that his assets were held safe until his tax liabilities had been settled.
By the order of 22nd February, 1982, it was provided therefore as follows:—
(1) Mr. Hoogstraten undertook (i) to file an affidavit disclosing his assets within the jurisdiction; (ii) to use his best endeavours to co-operate with the sequestrators to be appointed under the writ of sequestration to be issued pursuant to the order; and (iii) to use his best endeavours to co-operate with the Commissioners in calculating his tax liabilities and to authorise the Commissioners to inspect any documents which might come into the possession of the sequestrators.
(2) The application for Mr. Hoogstraten's committal was dismissed.
(3) The Commissioners were given leave to issue a writ of sequestration to sequestrate all Mr. Hoogstraten's property; and
(4) Mr. Hoogstraten was ordered to pay the Commissioners' costs on a common fund basis.
I have no doubt that all parties acted in good faith. I have no doubt that the Commissioners thought it a very sensible idea—as indeed it was—that Mr. Hoogstraten's assets should be put in the hands of safe professional managers while the extent of his assets and of his true tax liabilities was ascertained. I am fully prepared to accept that the nature of what was being done was explained to Mr. Justice Mais and that he too thought it a sensible and constructive outcome of a contested committal application. None the less, I am firmly of the view that what was done was not a proper exercise of the court's powers of sequestration and the order ought never to have been made.
Sequestration is one of the court's remedies by way of execution to ensure compliance with its orders: see 0.45, rr. 1 and 5. It is a particularly stringent remedy in that it can only be exercised against a person who is in contempt of court.
In the present case, however, Mr. Hoogstraten was no longer in contempt of court. He had made good his breaches of the Mareva injunction and had apologised (as his affidavit shows). There was nothing else for him to do. A Mareva injunction is a notoriously stringent remedy. There can be no jurisdiction to commit a man to prison merely for fear that he will in the future dispose of his assets in breach of a Mareva injunction and there can equally be no jurisdiction to sequestrate his assets for fear of future breaches of a Mareva injunction.
Essentially what had happened was that the Commissioners and Mr. Hoogstraten reached a commercial agreement for their mutual benefit under which his assets were to be entrusted to the management of the professional gentlemen who were appointed the sequestrators. This could have been done by appropriate documents executed out of court, but the parties found it convenient to invoke the court's process of sequestration and the judge acceded to their application.
Even though the order should not have been made, it was made, and unless set aside it is valid as an order of the court. On 25th February, 1982, the Commissioners issued the writ of sequestration pursuant to the order. That writ also is valid. It was addressed to four named individuals, the sequestrators. Two of them are solicitors and partners in the firm of Frere Cholmeley & Co., and the other two are surveyors and partners in the firm of Bernard Thorpe & Partners. I have no doubt that they were appointed sequestrators because of their professional skills and standing as partners in those firms.
The operative part of the writ followed the traditional centuries-old wording and authorised and commanded the sequestrators in confidence of their prudence and fidelity, to enter upon and take possession of all the real and personal estate of Mr. Hoogstraten and to collect, receive and get into their hands the rents and profits of his real estate and all his personal estate and to keep the same under sequestration in their hands until Mr. Hoogstraten should clear his contempt and the court should made other orders to the contrary. The reference to clearing his contempt is ironic since he had already done so. The writ of sequestration did not itself impose on the sequestrators any duty or power to manage Mr. Hoogstraten's estate, but on 4th March, 1982, the sequestrators applied ex parte to Mr. Justice Mais for, and obtained, an order empowering them to manage the several properties which they had already taken or might thereafter take into their possession and to continue or to determine or enter into any contract in respect of the properties forming part of the sequestration upon such terms as the sequestrators in their discretion considered...
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