Myers v Design Inc (International) Ltd.

CPR 25.1(1)(l) permits an order securing a specified fund only where there is an actual, identifiable fund over which the relevant party has legal title, possession or control, and the dispute concerns a proprietary right or interest in that fund. A debt owed by a defendant is a chose in action vested in the creditor. It is not itself a specified fund for this purpose, even where the creditor seeks to prevent the defendant becoming judgment proof. The appropriate protection for that concern is ordinarily a freezing order. The prospects of success in the underlying claim do not determine jurisdiction under the rule.

The claimant, suing as personal representative of the deceased, obtained without notice an order requiring the defendant to pay £900,000 into court. The sum was alleged to be a repayable loan. The defendant applied to set the order aside.

The central issue was whether the alleged debt constituted a specified fund within CPR 25.1(1)(l), which permits an order for a specified fund to be paid into court or otherwise secured where there is a dispute over a party’s right to the fund. The claimant also argued that the original proceeds of sale, or the debt itself, supplied the necessary fund.

1. Jurisdiction under CPR 25.1(1)(l). The rule requires an actual, identifiable fund. The person against whom the order is made must have legal title to, or possession or control of, it. There must also be a dispute about a party’s proprietary entitlement to, or interest in, the fund, and circumstances justifying its preservation.
2. The word fund has no fixed technical meaning. Allchin v Coulthard [1942] 2 KB 228 illustrated that it may mean actual cash resources or an accounting category. Shamia v Joory [1958] 1 QB showed that, in the context of a debt transfer, the word may include a debt. That context did not determine its meaning under the rule.
3. The original sale proceeds could not constitute the specified fund because they had been expended and the claimant had no proprietary right in them. The alleged debt was a chose in action vested in the claimant. It was not a specified fund and did not create a fund in which the claimant had a proprietary interest.
4. The claimant’s interest in preventing the defendant from becoming judgment proof was insufficient. A freezing order was the appropriate remedy for that purpose. The claimant’s prospects of success were immaterial to the jurisdiction under the rule, although they might support an application for summary judgment.
5. The defendant’s separate submission concerning secured-creditor status did not determine the issue. The court observed that an order under the rule preserves rights in the specified fund as they existed before the order and has no greater effect than appointing a trustee or receiver pending resolution of the dispute. In any event, the jurisdictional objection succeeded.
6. The order of 16 January 2003 was set aside.