DPP v Compton and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Simon Brown,Lord Justice May,Lord Justice Clarke |
| Judgment Date | 27 November 2002 |
| Neutral Citation | [2002] EWCA Civ 1720 |
| Docket Number | Case No: C/2002/0764/QBACF |
| Court | Court of Appeal (Civil Division) |
| Date | 27 November 2002 |
[2002] EWCA Civ 1720
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION (ADMINISTRATIVE COURT)
(Mr Justice Stanley Burnton)
Lord Justice Simon Brown
(Vice-President of the Court of Appeal Civil Division)
Lord Justice May and
Lord Justice Clarke
Case No: C/2002/0764/QBACF
A Mitchell Esq, QC & Miss S Brown
(instructed by The Crown Prosecution Service) for the Appellant
A Moran Esq, QC & J Dawson Esq
(instructed by Messrs Bermans) for the Second & Third Respondents
The First Respondent did not appear and was not represented
The Fourth Respondent did not appear and was not represented
This is an appeal by the Crown Prosecution Service ("CPS") with the permission of Buxton LJ against orders made by Stanley Burnton J in the Administrative Court on 26 th March 2002 by which inter alia he refused (i) to make a restraint order against the second respondents, Comptons of Brighton Limited ("the company") pursuant to section 26(1) of the Drug Trafficking Act 1994 ("the Act"), and (ii) to appoint a receiver to take over the assets of the company pursuant to section 26(7) of the Act.
To explain the nature of the appeal and how it has now come to be moot it is necessary first to set out certain basic facts. This I shall do as briefly as possible.
On 2 January 2001 Ronald William Compton, the first respondent ("Mr Compton"), pleaded guilty in the Hove Crown Court to offences of possession of heroin and cannabis resin with intent to supply for which on 17 January 2001 he was sentenced to seven years' imprisonment. He had been arrested on 4 November 1999 together with his wife, the fourth respondent ("Mrs Compton"), albeit she in the event was not prosecuted.
On 19 September 2000 Mrs Compton was adjudicated bankrupt; so too, on 24 October 2000 was Mr Compton. The trustee in bankruptcy for each was the third respondent, David Coyne ("the trustee in bankruptcy"). He and the company alone among the respondents have appeared to resist the CPS's appeal.
The company, set up by Mr Compton, was incorporated on 6 October 1993. Mr Compton was appointed sole director, Mrs Compton the company secretary. Two £1 shares were issued, one to each.
Following notice from the Companies' Registrar that the company was at risk of being dissolved, the first annual return for the year ending 6 October 1994 was filed on 19 September 1995. The company's business on the next annual return for the year ending 6 October 1995, and dated 12 January 1996, was stated to be "domestic furniture shops, antique dealers/used furniture and florists, nurserymen". On 12 September 1996 the company's annual accounts for 1994 and 1995 were filed; they showed the company to be insolvent.
From October 1996, however, there was a dramatic improvement in the company's fortunes. On 26 October 1996 a property was purchased in the company's name at 26 Chatsworth Road, Brighton ("Chatsworth Road") for £126,000. Mr Compton had paid the 10% deposit on 2 October 1996 by a cheque for £12,600 drawn on his private account and during the following three weeks large cash deposits were made into the company's accounts which enabled the company on 25 October 1996 to pay the balance of £113,400. On 31 October 1996 the company's balance sheet showed a director's loan of £106, 521.
On 9 May 1997 Mr Compton was granted letters of administration in respect of his mother's intestate estate, the net value of which was £67,113.
On 26 September 1997 adjacent properties at 9 and 11 Lansdowne Place, Hove, were purchased in the company's name respectively for £175,000 and £205,000. Nationwide Building Society advanced £393,400 for the purpose, a charge over Chatsworth Road being registered in their favour on 27 November 1997 and the building society taking a debenture over the company's assets.
On 9 January 1998 Mrs Compton transferred her £1 share to Sean Compton ("Sean"), one of her four sons. Sean and two of his brothers (Robert and Stephen) were convicted at Hove Crown Court on 16 January 2001. Sean and Robert were convicted of a number of drug trafficking offences for which they were sentenced respectively to 4 1/2 years' and 6 years' imprisonment. Stephen was convicted of money laundering offences and sentenced to 4 years' imprisonment. The fourth brother ("Ronald Jnr") had earlier been convicted at Lewes Crown Court on 27 April 1999 of possessing Class A and Class B drugs with intent to supply for which he was sentenced to 8 years' imprisonment and made subject to a confiscation order of £435,703.96.
Between May and July 1998 large sums in cash were deposited in the company's bank accounts. On 16 July 1998 £185,000 was transferred from the company's business reserve account to Mr Compton's account. On 11 September 1998 Mr Compton paid £56,000 as a 10% deposit on the purchase of 1a Tongdean Road, Hove, a property later registered in Sean's sole name and sold early in 2000 for some £650,000.
On 17 November 1999 Sean was appointed as a second director of the company.
On 17 July 2001 the trustee in bankruptcy obtained an order from the Brighton County Court setting aside the share transfer from Mrs Compton to Sean as a transaction at an undervalue.
On 30 August 2001 the Lansdowne Road properties were sold respectively for £375,000 and £350,000.
By the time of the interlocutory application before Stanley Burnton J on 26 March 2002, the property held in the company's name consisted essentially of:
i) £355,686 together with accrued interest, representing the net proceeds of sale of the Lansdowne Place properties;
ii) Chatsworth Road, then worth some £400,000;
iii) the rental income from Chatsworth Road, some £3,163 per month.
iv) the balance of the Lloyds TSB bank account.
Stanley Burnton J, as already indicated, refused the CPS's applications for restraint and receivership orders against the company. He did so for two independent reasons: first, because he was not satisfied on the evidence before him that it was appropriate to treat the company's assets as belonging to Mr Compton; secondly, because in any event he could not make the orders sought by virtue of section 32(2) of the Act:
"Where a person has been adjudged bankrupt, the powers conferred on the High Court or a county court by sections 26 to 30 of this Act or on a receiver so appointed shall not be exercised in relation to—
(a) …
(b) property for the time being comprised in the bankrupt's estate for the purposes of Part IX of the 1986 Act; …"
Having regard to sections 283 and 436 of the Insolvency Act 1986 (defining respectively "a bankrupt's estate" and "property") it is clear that if the company's property belongs beneficially to Mr Compton it is part of his estate.
I shall have to return to both those matters later, but first I must indicate just what orders the judge did make to safeguard the CPS's interests and then I must bring the story up to date.
The judge made a restraint order against Mr Compton in what may be called the usual terms save that it was subject to the proviso that "this prohibition does not include any property which for the time being forms part of the bankrupt's estate for the purposes of Part IX of the Insolvency Act 1986". He adjourned the CPS's applications for declaratory relief (applications, for example, that the property held in the company's name be declared to be owned by Mr Compton) to a date after 29 April 2002 (the date then fixed for the Crown Court hearing of the Crown's application for a confiscation order). By paragraph 4 of the order the judge ordered that the trustee in bankruptcy:
"Must not (a) in any way dispose of or deal with or diminish the surplus remaining in the bankrupt estate of Ronald Compton after payment in full and with interest of all the creditors of Ronald Compton and the payment of the expenses of Ronald Compton's bankruptcy and (b) in the event of annulment of Ronald Compton's bankruptcy dated 24 October 2002, pay [or] transfer any part of the bankrupt's estate vested in the … trustee in bankruptcy of Ronald Compton to Ronald Compton".
That order prevented the trustee in bankruptcy at the conclusion of Mr Compton's bankruptcy returning to him any surplus from the estate. It was, so to speak, an anticipatory restraint order.
So far as the company's assets and Mrs Compton's estate in bankruptcy were concerned, these were dealt with in parallel proceedings before the judge with regard to Sean, proceedings in which the trustee in bankruptcy was the applicant, the CPS the respondent. On 28 February 2002 the trustee in bankruptcy had secured agreement from the agents receiving the Chatsworth Road rents thereafter to retain these sums rather than pay them over to the company. On 26 March 2002, by way of variation to an undertaking previously given, the trustee in bankruptcy undertook:
"Not to take any steps to sell, dispose of or deal with any assets of [the company] otherwise than by way of taking steps to preserve those assets for the benefit of the persons who are entitled to those assets save that after 20 May 2002, in the event that [the company] is wound up, the [trustee in bankruptcy] be permitted to distribute up to half of the value of the assets of [the company] to the trustee in bankruptcy of Ronald Compton for the payment of Ronald...
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