England and Wales High Court (Commercial Court) Decisions

Neutral Citation Number: [2017] EWHC 3334 (Comm)

Case No: CL-2017-000323; (formerly CJA No 73 of 2005)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Date: 6^th December 2017

Before :

Mr Justice Popplewell

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Between :

In the Matter of Gerald Smith

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Sebastian Kokelaar (instructed by Richard Slade & Co LLP) for the Phoenix & Minardi

Dominic Kendrick QC & Tim Akkouh ( Byrne & Partners LLP ) For Harbour II

Martin Pascoe QC & Rupert Hamilton (Holman Fenwick Willan LLP) For Joint Liquidators

Ian Gatt QC & Sean Upson ( Stewarts Law LLP ) For Stewarts Law

Kennedy Talbot QC & James Mather ( SFO ) For SFO

Tony Beswetherick (Stephenson Harwood LLP  ) For Receivers)

Dr Gerald Smith in person

Hearing dates: 6^th – 7^th December 2017

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1.      It seems to me there is jurisdiction both under section 37 and under the 1988 Act.  The expression "realisable property" in section 77 and section 80 includes property in respect of which there is a dispute but there is shown to be a good arguable case that it constitutes realisable property.  There is good reason why that should be so; otherwise it would not be possible to fulfil what is the obvious purpose of those sections, namely the preservation of assets in any case where there was a dispute before that dispute was resolved.

2.      Mr Kokelaar submits, correctly, that that rationale would not apply where all that were being done by way of restraint was preservation without any realisation, but the jurisdiction in section 77 and section 80 must have been intended to encompass many cases where preservation involved realisation.  That seems to me to be obviously a good reason for construing the sections in that way.  I am fortified in that conclusion by the decision of the Court of Appeal in Piggott, by which indeed I am bound.

3.      The main argument to the contrary rested on section 81(1) and the decision of the Divisional Court in the Hansford case, in particular Lord Justice Dyson at paragraphs 24 to 26.  That was not a case where third party claims were involved or where there was a contest as to whether property constituted realisable property, but the construction of section 81(1) was that unless one came within the proviso words "after such payments, if any, as the High Court may direct to be made out of those sums" then the obligation upon realisation was indeed that the proceeds were immediately to be applied towards the satisfaction of the confiscation order. 

4.      I see no difficulty in giving effect to that interpretation as a correct one and an order under section 77 or section 80 being capable of being made in respect of property over which there is a dispute as to whether it constitutes realisable property, because the court can make a direction that if there is any realisation as a result of the receivership order, it is not to be applied towards the satisfaction of the confiscation order unless and until there has been a resolution of the dispute as to whether property constitutes realisable property.

5.      The court can make an order for the retention by the enforcement receivers to abide that event.  In practice that will mean -- and if necessary this can be set out in terms in the order -- that realisation of proceeds in the course of the receivership will be paid into a separate account so that they can be separately identified.  In my view, that comes within the wording of a payment out of the realised sums which the High Court may direct. 

6.      I recognise that it might not be the immediately obvious use of language to describe that as a payment "out of the proceeds", but that is a perfectly sensible construction of section 81(1) and one which is necessary to give effect to the purpose of the scheme as a whole, which is on the one hand to enable assets, if it's arguable that they are realisable property, to be preserved pending resolution of that dispute, and on the other to enable them once that dispute has been resolved to be paid out in satisfaction of the confiscation order.

7.      So for those reasons, I hold there is jurisdiction both under section 37 and under the 1988 Act.