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Restraint orders and POCA 2002 (Ready Rentals v Ahmed)

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Ready Rentals Ltd v Ahmed and another, Crown Prosecution Service v Ahmed [2016] EWHC 1996 (Ch)

The Chancery Division granted a restraint order to the Crown Prosecution Service prohibiting the defendant, who the police were investigating for alleged fraud, from dealing with money which he had paid into court in accordance with an order made in proceedings brought by the claimant. However, the claimant had security over the money in court for the sums properly due to it in respect of the relevant costs. It was therefore immediately entitled to the part of the money paid in which the court had previously ordered was to be paid to its solicitors and it enjoyed security for such further sums as proved to be due to it in respect of costs. But it would not be permitted to recover the half of the fund that its compromise agreement with the defendant provided for it to take.


What was the background to the case?

The claimant had won an action against the defendant, who was ordered to pay the claimant’s costs, to be the subject of detailed assessed if not agreed. The court subsequently made a freezing order against the defendant, which included a provision that it would cease to have effect if he ‘provided security by paying the sum of £90,000 into court, to be held to the order of the court’. The court then ordered that the defendant should pay into court the sum of £90,000, pending detailed assessment of the claimant’s costs. It was further ordered that upon receipt of the payment, the court should pay the claimant’s solicitors the sum of £11,898.50. The defendant accordingly paid the £90,000 into court. The court, having been contacted by the West Midlands Police, then ordered that the payment should not be paid out of court ‘unless an application is made to that effect on notice to West Midlands Police’.

By the date of the claimant’s liquidation some three years later the payment of £11,898.50 had not been made by the court, the detailed assessment of costs had still not taken place, and no attempt had been made by the Crown to pursue a restraint order under the Proceeds of Crime Act 2002 (POCA 2002).

The claimant and the defendant negotiated a compromise and sought an order that the funds in court should be divided equally between them. In response, the Crown applied for a restraint order to prohibit the defendant from dealing with realisable property that he held, which would include the money paid into court.

Thus the court had to determine to whom the funds in court belonged. The liquidator contended that the claimant held an equitable charge over the money in court and that any restraint order could not extend to its share of the funds having regard to POCA 2002, s 426, which provides that there is no power to make a restraint order that would:
‘[…]inhibit the liquidator from…distributing property to creditors’ or ‘prevent the payment of expenses properly incurred in the winding up.’

The Crown’s position was that a restraint order should be made against the defendant and that the monies held in court represented his ‘realisable property’, within the meaning of POCA 2002, s 41(1).


What issues did the case raise? Why is it significant?

The issues were:
1.    Was it appropriate, delay apart, to make a restraint order as regards at least some of the money in court?
2.    Should the court decline to make a restraint order on grounds of delay?
3.    Did the claimant have any ‘interest’, within the meaning of POCA 2002, s 69(3)(a), in the money in court? If so, what was its interest and what were the implications?
4.    What, if any, difference did POCA 2002, s 426 make?


What did the court decide on those issues?

First, the court made a restraint order against the defendant and decided that the order should encompass the money in court. The court was not persuaded that it should decline to make a restraint order because of delay by the Crown. However, it was found that the restraint order could only extend to the defendant’s interest in the monies in court and that the order in favour of the claimant in respect of costs did amount to security over the money in court. The restraint order could not extend to monies over which the claimant held security and the money in court should be used firstly to meet the costs liability previously imposed. Flightline Ltd v Edwards [2003] EWCA Civ 63, [2003] All ER (D) 50 (Feb), in which there was a finding of no security where a defendant was barred from dealing with monies, was distinguished on the basis that the order against the defendant in the instant case went further than preventing a disposal of assets—it specifically allowed him to pay monies into court which would be ‘held to the order of the court pending detailed assessment’. Given the finding of security in favour of the claimant, the court did not need to concern itself with POCA 2002, s 426.


How helpful is this judgment in clarifying the law in this area?

The judgment helps to clarify the circumstances in which a freezing order can amount to security. In this instance, provision was made for the debtor to pay monies into court as security for a costs order and it did not matter that the costs were at the time unquantified. The judgment further clarifies that a restraint order cannot extend to funds that are the subject of such security.
What does the case mean for lawyers and their clients?

Lawyers should be aware that in certain instances monies paid into court pursuant to a freezing order may be subject to security in favour of a named creditor, but it will turn upon the wording of the order in each case. Those acting for a claimant should see their client’s position strengthened by obtaining an order in the terms granted to the claimant in these proceedings.


Mark Noble represented the claimant in this case.
Interviewed by Robert Matthews.

 

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The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.