Deputy ICC Judge Curl KC’s judgment in Wade & Anor v Singh & Ors [2024] EWHC 1203 (Ch) follows applications by the liquidators of MSD Cash & Carry plc to enforce charging orders over a number of properties owned by the defendants, all of them members of the same family. The main protagonists were Mohinder Singh, Surjit Singh Deol and Raminder Kaur Deol, Mohinder being the father of Surjit, and Raminder, married to Surjit. The estate of a deceased family member was added as a party.
Proceedings under CPR Part 8 were originally issued in June 2022 against Mohinder, Surjit and Raminder by a predecessor liquidator to enforce a series of charging orders that had secured a judgment debt of £996,494 due from Mohinder and Surjit. The applications concerned four properties, but as a result of procedural rulings by the deputy judge and other matters it was agreed that those relating to some should be addressed at a later hearing. As a result, the judgment deals largely with issues arising in connection with a property known as the Oaks.
The facts of the case are convoluted, especially as regards title to the property (there were seven titles) and the circumstances of its acquisition, but in essence, as the deputy judge describes things, the defendants’ case before him was that Raminder was the sole beneficial owner of the Oaks: the property had been held on trust for her since it was acquired in 2003. They relied on a declaration of trust dated 17 April 2017 to that effect. The defendants denied that the deed was a sham or gave rise to a transaction in fraud of creditors within the meaning of s 423 Insolvency Act 1986, as contended by the applicants,. The defendants asserted the existence of an express trust or, in the alternative, a common intention constructive trust, claiming that the trust arose either on acquisition of the property in 2003 or, alternatively, on execution of the declaration of trust in 2017.
The judge identified the issues as follows:
(i) Was there an oral express trust of the beneficial interest in the Oaks in favour of Raminder at the time of its purchase in 2003? If so, was the declaration (in particular certain recitals) capable of satisfying the requirements of s 53(1)(b) Law of Property Act 1925 (which requires that “a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will”)? The defendants’ primary case was that an express declaration of trust had arisen in 2003. They recognised that it was not enforceable at that time because it did not satisfy s 53(1)(b), but they contended it had become enforceable on execution of the declaration in 2017 because the 2003 trust was referred to in the recitals to the declaration.
(ii) Alternatively, did a common intention constructive trust of the beneficial interest in the Oaks arise in favour of Raminder at the time of its purchase in 2003? That required a common intention shared by Mohinder and Raminder which could be inferred from conduct, together with detrimental reliance on the part of Raminder.
(iii) In the further alternative, and if the express and constructive trust arguments failed, did the declaration create an express trust of the beneficial interest in the Oaks on its execution? The defendants said the declaration had been executed on 17 April 2017; the liquidators suggested it was done later.
(iv) Was the declaration a sham? To establish sham, the applicants would have to show that Mohinder and Raminder had intended to give to third parties or the court the appearance of creating between them rights and obligations different from the actual legal rights and obligations, if any, they had intended to create.
(v) Alternatively, if the declaration was not a sham, could it be impugned under s 423 IA 1986? That would mean showing that Mohinder had entered into the declaration for the statutory purpose in s 423(3) of putting assets beyond the reach or otherwise prejudicing the interests of creditors.
Although extensive submissions on the law were made to the judge (he said over fifty cases and over a dozen extracts from textbooks had been cited to him), he found that there was not a great deal between the parties on matters of law, the exception being as to whether the principles of common intention constructive trust applied (as the defendants submitted) or those of resulting trust (as the liquidators submitted). He also said, however, that, ultimately, disagreement on the point made no difference to the outcome of the case.
It was common ground that there were three requirements for a trust to be valid and enforceable: certainty of (a) intention to create a trust; (b) subject matter; and (c) objects. The last two, the deputy judge noted, did not appear to be capable dispute: the subject matter was the Oaks, and the object was Raminder. Intention, then, was the focus of much of the judge’s comprehensive review of the evidence and the facts. He said:
“In my judgment, there is nowhere near enough evidence to support the view that Mohinder had the requisite intention to create an express trust in relation to the Oaks in 2003. There is really no evidence at all that he made an express declaration of trust at that time. At most, the evidence shows that Mohinder and Raminder intended from the outset that the Oaks would be purchased and developed into a family home for Raminder and her family; there is also support for the view that Mohinder hoped and expected that one day Raminder’s sons would come to own the Oaks. That does not come close to proving an express declaration of trust in 2003. I am driven to the conclusion that through a combination of wishful thinking and a desire to protect assets from Mohinder’s creditors, the Defendants’ witnesses have retrospectively given a clarity and effect to general statements by Mohinder about his present and long-term aspirations for the Oaks that they were not intended by Mohinder to have, and were not understood by others to have, at the time when they were made.”
Having rejected the contention that an express trust had been created in 2003 that was later evidenced in writing in 2017 by the declaration, he moved to consider whether there had been a common intention constructive trust. That required consideration of two questions: had Mohinder and Raminder shared a common intention that the Oaks should be held on trust solely for Raminder; and had Raminder relied to her detriment on that common intention?
Again on the evidence and the facts the deputy judge found against the defendants, holding that “the evidence plainly shows that both aspects must be answered in the negative.”
Having rejected the defendants’ primary and secondary cases, the judge turned to the third basis of their defence: the declaration having created an express trust in favour of Raminder on 17 April 2017. This involved dealing with two challenges to the declaration by the liquidators: first, that the declaration was a sham (as to which see Snook v London and West Riding Investments Ltd), and secondly, if it was not a sham, then it was a transaction defrauding creditors within the meaning of s 423 IA 1986.
On the sham issue, the judge drew on JSC Mezhdu Narodniy Promyshlenniy Bank v Pugachev in which Birss J reviewed the authorities and concluded that, in the case of a trust alleged to be a sham, the unilateral intentions of the settlor were not enough: there had to be a common intention between settlor and beneficiary, although reckless indifference on the part of someone “going along” with the shammer was also sufficient to make out a common intention.
The judge declined to find that the declaration was a sham: “My principal reason for reaching that conclusion is that the Declaration was drafted in such a way that there was no possibility that the parties to it might need to give the appearance to third parties or the court of having rights and obligations different from those created under the Declaration,” he said, going on to elaborate by reference to other features of the case.
The liquidators fared better on s 423. The judge followed Leggatt LJ in JSC Bank v Ablyazov in which he said:
“It is sufficient simply to ask whether the transaction was entered into by the debtor for the prohibited purpose. If it was, then the transaction falls within section 423(3), even if it was also entered into for one or more other purposes. The test is no more complicated than that.”
He found that the liquidators had made out their case sufficiently to satisfy that test, holding that the declaration had been entered into for the purpose of putting an asset (Mohinder’s beneficial interest in the Oaks) beyond the reach of a person who was making a claim against him: “Those persons, in my judgment, were either or both HMRC and [the former liquidator].” He based that view, among other things, on the inclusion in the declaration of a power of revocation which could have had no real purpose other than to exclude Mohinder’s interest in the Oaks from his estate; on the fact that “the Declaration was undeniably conceived, drafted and executed in close proximity to actual claims being brought against Mohinder;” that advice to enter into the declaration had been given in contemplation of an HMRC investigation; and the fact that “there is really nothing going in the opposite direction to dispel the inference that the Declaration was entered into for the statutory purpose in s 423(3) to which the basic chronology powerfully gives rise.”
For the foregoing reasons he decided that the Oaks had been legally and beneficially owned jointly by Mohinder and Raminder immediately prior to execution of the declaration. The declaration had been a transaction within the meaning of s 423(1) IA 1986, and Mohinder had acted for a purpose in s 423(3)(a) in entering into it. The declaration was thus susceptible of an order under s 423(2) to restore the position to what it would have been had the declaration not been entered into. He indicated that the appropriate order would be to set aside the declaration and vest the beneficial interest in the Oaks in Mohinder and Raminder in equal half shares.
Wedlake Bell LLP acted for the successful applicant liquidators.