RE D
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE OUSELEY,MR JUSTICE COLLINS |
| Judgment Date | 20 November 2006 |
| Neutral Citation | [2006] EWHC 3408 (Admin),[2006] EWHC 254 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 20 November 2006 |
| Docket Number | DTA/149/1995,DTA/149/95 |
[2006] EWHC 254 (Admin)
IN THE HIGH COURT OF JUSTICE
THE ADMINISTRATIVE COURT
QUEEN'S BENCH DIVISION
Mr Justice Ouseley
DTA/149/1995
MR M SUTHERLAND WILLIAMS [instructed by Byrne & Partners, London EC4M 4NN] appeared on behalf of the R&CPO
MR P SHAW [instructed by Stephenson Harwood, London] appeared on behalf of X LTD
Mr D was convicted of serious drug trafficking offences and was made subject to a confiscation order in the sum of £800,000. To assist in its enforcement a restraint order was made in October 1995. The £800,000 has largely been unpaid and Mr D, the defendant, is now serving four years in custody in respect of that lack of payment. He was returned to prison in July 2005.
Mr D, in 2004 or 2005, set up a business with a Mr J, "X" Ltd. Each owned one of the two issued shares. There are no other shareholders. Mr D put in to the company some capital and, as later appeared, so too did Mr J. The company is engaged in property development in a small way. Mr D revealed the existence of his interests in this company to the Asset Forfeiture Unit of the Revenue and Customs Prosecution Office ("R & CPO") in July 2005. In consequence the R & CPO obtained without notice on 12th August 2005 from Stanley Burnton J a variation to the restraint order and a receivership order. The receivership order appointed a receiver over Mr D's assets. It ordered him, his wife and X Ltd to deliver up the realisable property of the defendant in X Ltd and gave the receiver wide powers over a property in which Mr D had an interest and required information to be provided about its assets from X Ltd. The variation to the restraint order added property assets in the name of X Ltd, Mr D's shareholding and shares in X Ltd to the list of specifically identified restrained property in the schedule. It also added two paragraphs as follows:
"2. X Ltd is prohibited from disposing of, diminishing or otherwise in any way dealing or attempting to deal with any of its assets including, but not limited to its interest (if any) in 37 Aliwal Road, Battersea, London SW11 1RB.
3. This Order does not prohibit X Ltd from spending £1,000 on legal advice and representation. But before spending any money X Ltd must tell the Revenue and Customs Prosecutions Office where the money is to come from."
On 23rd September 2005, X Ltd made applications for the variation of the restraint order and the receivership order backed by undertakings which it offered which would have reduced significantly the control which the receiver had over the assets of X Ltd. The late service of documents led to an adjournment by consent. There was a consent order which increased to £35,000 the sum which could be spent on legal costs on certain terms:
"5.2 The Company may incur and/or Mr J, on behalf of the Company, may incur costs in respect of legal expenses from the date of the Receivership Order which are actually, reasonably and properly incurred in relation to any matters arising out of or in connection with the Receivership Order dated 12 August 2005 and/or the Restraint Order dated 10 October 1995 (as varied by the Variation Order dated 12 August 2005) and/or in relation to the Company's application.
5.3 Within 2 working days of the Managing Receiver being in possession of funds for the sale of the Ground Floor Flat, the Managing Receiver will cause the Company to pay such funds to Stephenson Harwood in respect of the costs (or part thereof) incurred by Mr J on behalf of the Company, provided that before any such funds are released for this purpose, Mr J shall notify the Managing Receiver in writing of the following matters:
(a) the general nature of the costs incurred;
(b) the time spent and by whom (whether partner, assistant solicitor or otherwise) in incurring the said costs;
(c) the hourly rate applicable to the costs incurred
and in the event that the Managing Receiver does not consider the costs (or part thereof) to be actually, reasonably, reasonably and properly incurred, the Managing Receiver shall notify Mr J in writing within the time provided for payment under this clause 5.3 of the amount he considers not to have been actually, reasonably and properly incurred ("the Disputed Costs") and the reasons therefor and there shall be liberty to apply in respect if the Disputed Costs."
It was accepted by Mr Shaw on behalf of X Ltd that those provisions applied to the costs of this application and other costs in respect of which there was a further application to which I shall come.
The consent order also envisaged that the receiver and Mr J meet to discuss matters relating to the completion and sale of the remaining property.
That adjourned application is now back before me for decision. There is also an application for an increase in the costs limit to £90,000 plus VAT, less an offered £10,000, of which £65,000 had by 16th December 2005 already been incurred and £25,000 was then prospective. The balance between those two will now have altered considerably. It appears that that financial limit was exceeded by mid-October and it is said to be an oversight that meant that no earlier application was made to the court. Both applications are wholly opposed by the R & CPO.
It was first contended on behalf of the company that the 'without notice' orders made by Stanley Burnton J should be discharged because of material non-disclosure. The basis for that, put shortly, is that a company search in respect of X Ltd had been obtained but was not exhibited to any of the witness statements before that judge. It was said that the effect of exhibiting the company search would have been to show that Mr J was the sole registered director of the company and that Mr D's role as company secretary had ended on 22nd July 2005 and that he had no, to quote Mr Shaw, "de jure" role as director. It is also said that it would have led via an application for a debenture issued by the Bank of Scotland to the realisation that the company had its own bank account, and that in turn would have cast doubt over the evidence on behalf of the R & CPO suggesting that Mr D had used a restrained personal account as a business account for X Ltd. It is also said that the court was not told that Mr J was still available to make decisions for the company and to execute the relevant documents in enabling X Ltd to function. Accordingly, the risk of the dissipation of its assets could not be increased because Mr D was in prison as was asserted in the evidence. It is also said that those factors went to the absence of a need to lift the corporate veil as well as making the appointment of a receiver or the more extensive variation order unnecessary.
The essence of the without notice case was that there was a substantial confiscation order which remained unmet. Mr D was a criminal and untruthful in what he had said in the past in relation to his assets. He had also used bank accounts in breach of the restraint order for the purpose of carrying out significant transactions with the aim of putting his assets beyond the reach of the R & CPO. He was now claiming that he had sought to establish himself as a legitimate property developer through X Ltd. The R & CPO had said that Mr D's letter complained that the freezing of his personal account had left him "emasculated" in his business dealings. He said he was in business as part of X Ltd. He was the company secretary. He and Mr J owned each one of the two issued shares. This company had however been incorporated one month after Mr D said that he had no interests in property. He was a director of X Ltd and X Ltd, it was said, was being used as a means to cloak D's dealing with his assets to put them beyond the reach of the R & CPO. The precise real relationship with Mr J was unclear.
It would have been perfectly reasonable, in my judgment, for the company search to have been exhibited but it would have been a marginal decision by the R & CPO very much on the borderlines of judgment. The essence of their concern is of course not with the formal position of directorships but with the substance of ownership and control to which the formal position would be of very limited relevance. The judge was dealing with the dishonest subject of a confiscation order in respect of whom there was significant evidence that he had been evading it in breach of the restraint order and was using a company to hide or deal with his assets. This is an obvious way in which someone might seek to put his assets beyond reach of the R & CPO but keep them available indirectly for himself.
In effect, had the company search been exhibited it would have been an inherent part of the R & CPO's claim that it had no relevance to the real position which led to the applications being made. In any event, Mr D said that he was a director and there were documents that showed he was a director —for example the accounts which he signed and of which Mr J knew, even though he later says that that description of Mr D was wrong. The evidence showed that Mr D had said that he used his personal account for business, so saying that the company had a business account would not alter the significance of what Mr D said he was doing. Again, the existence of a bank account by the company would have been said to be irrelevant to the significance of the involvement of Mr D in that business.
As to the position of Mr D in prison and Mr J being outside prison, there was at that stage real uncertainty as to what the true relationship between them was, as to whether Mr D, who made a practice of putting property in other people's names, was in...
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