ON APPEAL FROM THE HIGH COURT OF JUSTICE
MR JUSTICE HENDERSON
HC09C03170,  EWHC 2570 (Ch)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE SULLIVAN
LORD JUSTICE PATTEN
| SUSAN ANN SZEPIETOWSKI
|- and -
|THE SERIOUS ORGANISED CRIME AGENCY
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Sarah Harman and Kate Selway (instructed by SOCA Legal Department) for the Respondent
Hearing date : 26th May 2011
Crown Copyright ©
Lord Justice Patten :
(1) The Old Bank, 109 Hare Lane, Claygate ("the Old Bank") which included the freehold of the property and two registered leases of the first and second floors and of the basement and ground floors;
(2) 2, 4 and 6 Torrington Close, Claygate ("Torrington Close");
(3) 2 and 2a Thames Street, Walton on Thames ("Thames Street"); and
(4) 3 and 5 Church Street, Esher ("Church Street").
"2. Upon the Trustee taking possession of the Transfer Properties and the Additional Properties, the Interim Receiving Order granted by Mr Justice Stanley Burnton on 26 October 2005 (POCA No. 8611 of 2005) (the "Interim Receiving Order") shall be discharged as against any of those assets listed at Annexe A to Schedule 4 hereto or any other asset listed in Appendix 2 to the Interim Receiver's Report dated 18 August 2006.
4. Immediately after the vesting order made in paragraph 1 above takes effect, all further proceedings in this claim by the Claimant against the Compromising Defendants to the assets listed at Annexe A to Schedule 4 hereto, any other asset listed in Appendix 2 to the Interim Receiver's Report dated 18 August 2006 and any asset of the Compromising Defendants of a value less than £20,000 (but, for the avoidance of doubt, excluding those aspects of the claim referred to at paragraph 5 below) be stayed upon the terms set out in Schedule 4 hereto save for the purpose of carrying such terms into effect and for that purpose the Claimant and the Compromising Defendants have permission to apply."
"in full and final settlement of all of the Director's claims against the Respondents in relation to the properties and the other assets listed in Annexe A to this Deed, the Tax Liabilities of John Szepietowski and Susan Szepietowski as defined in paragraph 13 below, any other asset listed in Appendix 2 to the Interim Receiver's Report dated 18 August 2006 and any asset of an individual value less than £20,000 (together the "Settled Claim")."
"4.1. Once the Vesting Order referred to at para 3.1 above has been made by the Court, Susan Szepietowski and the Trustee shall use their best endeavours to progress the sales of the Additional Properties to those buyers who are currently interested in the Additional Properties and shall keep each other informed of all steps they are taking in [that] regard.
4.2. In the event that a materially higher offer is received for any Additional Property pre any exchange of contracts, than that received at the date of this deed, then provided that shall yield a higher net return on completion, taking into account the cost of borrowing, any such offer shall be considered and if agreed between Susan Szepietowski and the Trustee as being the best offer shall be proceeded with in addition to any existing offer, it is permissible to apply all reasonable commercial pressure including re marketing and contract races (by way of example) to sell the said properties.
4.3. If the current offers do not proceed, then Susan Szepietowski shall be entitled to deal with the Additional Properties by selling them, or any one of them, at a price agreed with the Trustee and through the Trustee.
4.4. If after 6 months following from the date of the vesting of the Additional Properties some or all of them have not been sold i.e., no contract for sale has been exchanged, then Susan Szepietowski must elect in respect of those Additional Properties either that the property:
4.4.1. remains vested in the Trustee who shall then sell the property at the best price reasonably obtainable and use the proceeds of sale first in the discharge of any charges and secondly to account to Susan Szepietowski for any remaining monies by way of payment to Devonshires; or
4.4.2. is transferred back to Susan Szepietowski, subject to the charges and any liability to any tax.
4.5. If the Trustee wishes to sell the Transfer Properties at 2 and 2(a) Thames Street, Walton on Thames and 3 and 5 Church Street, Esher (the 'Remaining RBS Properties') before the Additional Properties are sold then the Respondents agree that, if the Royal Bank of Scotland consent, the combined charge over these properties and the Additional Properties in favour of the Royal Bank of Scotland (amounting to £3,398,507.18 as at 14 January 2008) (the 'Charge') shall be transferred to the Additional Properties only. If the Royal Bank of Scotland does not so consent then Susan Szepietowski will grant a charge to the Trustee or the Director, as directed by the Director, for the sums paid by the Trustee or the Director to the Royal Bank of Scotland from the sale proceeds of the Remaining RBS Properties.
4.6. The Respondents and the Trustee agree that the total funds from the sale of the Additional Properties shall be used in priority to the funds from the sale of the Remaining RBS Properties in satisfaction of the Charge.
4.7. The Respondents and the Director and the Trustee agree that on the sale of the Additional Properties the proceeds of sale shall be first applied against the settlement of any charges registered against those properties i.e., the bank charge and any charge under 4.5 above and the balance of the proceeds shall be fully accounted for by the Trustee to Susan Szepietowski without deduction or set off.
4.8. In the period before the sale of all or any of the Additional Properties is completed, the said Additional Properties shall be managed by Susan Szepietowski. Susan Szepietowski shall receive all income and discharge all expenses including all services and insurances. If the Trustee is obliged to insure the Additional Properties then Susan Szepietowski shall reimburse the Trustee for the amounts paid."
"The Director agrees that if, once all of the Transfer Properties are sold and all encumbrances are discharged, the Director receives funds amounting to more than £5,375,000.00 (Five Million Three Hundred and Seventy Five Thousand Pounds) then the Director will pay such excess, up to a maximum of £27,679.97 back to the Respondents (by way of a payment made to Devonshires Solicitors."
"31. This brings me on to a more general point. Looking at the Consent Order and the Settlement Deed as a whole, it appears to me that, for the purposes of the compromise, the parties drew a clear distinction between Ashford House on the one hand and the other four properties subject to the RBS charge on the other hand. Ashford House was one of the released properties and, as I have already said, the figure shown for the debt charged upon it in Annexe A to the Settlement Deed must exclude most, if not all, of the RBS debt. Furthermore, the deed was made in full and final settlement of all of SOCA's claims against Mrs. Szepietowski in relation to, among other properties, Ashford House: see para.2.1. The main such claim was obviously SOCA's claim that Ashford House was recoverable property, but the wording of para.2.1 is wide and general, and my provisional view (although I have not heard argument directed to this specific point) is that it is wide enough to rule out any claim by SOCA to be granted security by Mrs. Szepietowski on Ashford House.
32. There would be nothing inherently surprising in the parties having agreed to exclude Ashford House in this way. It was, and is, the Szepietowskis' home where they live with their young family, one of whom has special needs. In January 2008, nobody foresaw the crash in the property market with which we are now all too familiar, and, on the basis of the figures set out in the schedules to the Consent Order, there appeared to be ample equity in the other four properties to discharge the RBS debt in full. One would indeed expect the unconditional release of Ashford House to have been a key feature of any compromise acceptable to the Szepietowskis."
"Finally, Ms. Harman argued that even if, on the true construction of para.4.5, Mrs. Szepietowski could only be required to grant a charge over the Additional Properties, the court should still order her to do so, and should not take the short cut of simply directing that the net proceeds of sale of the Additional Properties should be paid to RBS. The reason for this, as Ms. Harman made clear, is that SOCA intends in due course to rely on the equitable doctrine of marshalling and, in broad terms, will ask the court to direct that RBS should satisfy its charge out of Ashford House (on which SOCA would, on this hypothesis, not have a charge) in priority to the Additional Properties (on which both SOCA and RBS would have a charge) or, alternatively, to order that SOCA should be subrogated to the rights of RBS in relation to Ashford House if that security were the first to be realised by RBS: see generally Fisher and Lightwood's Law of Mortgage, 12th edition, paras.45.8 to 45.12, and Halsbury's Laws of England, 4th edition, volume 32, paras.833 to 836."
"What the wording of paragraph 4.5 did in my judgment reflect, like the Annexes, was a common intention and expectation that the Bank's debt would be satisfied by the sale of either or both of the Claygate Properties and the Remaining RBS Properties. But as Miss Harman for SOCA submitted, a common intention and expectation of that nature is not the same thing as a contractually binding agreement that Mrs Szepietowski's debt to the Bank was to be regarded for the purposes of the compromise as being charged only on the Claygate Properties and the Remaining RBS Properties, to the exclusion of Ashford House. The need for such an agreement to be clearly expressed was all the stronger, in my view, because the Bank was not a party to the compromise, and the parties could not by agreement between themselves release Ashford House from the Bank's second charge. An agreement between the parties to proceed on the footing that Ashford House was released from the Bank's charge was, no doubt, conceptually possible, but if they had intended to contract on that basis one would expect them to have said so explicitly, and not to have left such an important point to be gathered from the indications relied upon by Mr Mitchell."
"35. It remains to consider whether SOCA's marshalling claim is precluded by paragraph 2.1 of the Settlement Deed, which provided that it was made in full and final settlement of "all of the Director's claims" against the Szepietowskis in relation to the properties listed in Annexe A, including Ashford House. In my judgment, it is not. The Director's claim in relation to Ashford House was that it was recoverable property: see paragraph 20 above. Paragraph 2.1 did not refer to possible future claims against or relating to the released properties, and there is no reason to suppose that it was intended to do so. For example, if evidence were subsequently to come to light that Ashford House had been bought with the proceeds of alleged criminal conduct quite separate from that alleged in the present case, or if SOCA were to seek to enforce an order for costs by obtaining a charging order on Ashford House, I see no reason to doubt that the claim would fall outside the scope of the settlement. Clear words would have been needed if the settlement was to extend to future claims unconnected with the subject matter of the existing proceedings, and in particular to claims based on factual situations which had not yet arisen.
36. Miss Harman referred me in this connection to the decision of the House of Lords in BCCI v Ali  UKHL 8,  1 AC 251, where the House held that there were no special rules of interpretation applicable to a general release in a settlement agreement, and that it was to be construed in the same way as any other contract by reference to the principles expounded by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society  1 WLR 896 at 912-913. The facts in that case were more extreme than the facts in the present case, because there was no way in which the parties could have foreseen the claims for stigma damages that the employees of BCCI who had been made redundant in 1990 subsequently wished to advance. On the other hand, the settlement agreement which the employees had entered into with BCCI in 1990 was broadly worded, obliging the employees to accept the terms on offer "in full and final settlement of all or any claims whether under statute, common law or in equity of whatsoever nature that exist or may exist" against the bank. Despite the breadth of this wording, however, their Lordships held, Lord Hoffmann dissenting, that the stigma claims were not caught by the terms of the settlement. As Lord Bingham put it in paragraph :
"On a fair construction of this document I cannot conclude that the parties intended to provide for the release of rights and the surrender of claims which they could never have had in contemplation at all. If the parties had sought to achieve so extravagant a result they should in my opinion have used language which left no room for doubt …"
See too the speech of Lord Nicholls at . The present case is not, of course, on all fours, but application of the principle laid down by the House in that case satisfies me that the wording of paragraph 2.1 was not wide or clear enough to embrace a future marshalling claim by SOCA in relation to Ashford House."
"But it is the ordinary case to say that a person having two funds shall not by his election disappoint the party having only one fund, and equity, to satisfy both, will throw him, who has two funds, upon that which can be affected by him only, to the intent that the only fund, to which the other has access may remain clear to him." (emphasis added)
Lord Justice Sullivan :
Lady Justice Arden :