Ajou v Stern & Ors

An assignment of proceeds is construed in its commercial context. Where an agreement gives priority to a claimant over sums remaining after payment of obligations secured by mortgages, the relevant question is the extent to which those obligations are secured on the property, not whether the underlying debts remain outstanding after the mortgages have been discharged. Issue estoppel depends on the issues actually determined in earlier proceedings. Procedural rules governing the pleading of interest regulate the exercise of the court’s statutory power to award interest; they do not remove that power.

The respondent had obtained a judgment against Dollar Land Holdings in the Court of Appeal in 1994, but remained unpaid. He later agreed to withdraw opposition to a creditors’ voluntary arrangement in return for an assignment concerning the proceeds of sale of a Brussels property owned by a subsidiary.

Subsequent transactions discharged the mortgages while preserving some underlying debts on an unsecured basis. The High Court construed the assignment in the respondent’s favour, rejected an issue-estoppel argument based on an earlier judgment of HH Judge Reid QC, and awarded interest under section 35 A of the Supreme Court Act 1981. The appellants challenged those conclusions.

1. Appeal dismissed. The assignment had to be construed in the commercial context of a long-unsatisfied judgment debt and a property capable of satisfying it only to the extent of any surplus over prior encumbrances.
2. The relevant priority depended on the extent to which the obligations were secured on the property. The underlying obligations did not retain priority merely because they survived after the mortgages had been discharged.
3. No issue estoppel arose. The earlier proceedings had been expressly confined to five complaints, and questions of priority remained unresolved. The refusal to grant a money judgment did not imply a final determination against the respondent.
4. CPR 16.4 regulated the exercise of the statutory power to award interest but did not remove it. Any pleading defect could have been addressed by amendment and an opportunity to respond. The judge was entitled to award interest, and there was no basis for appellate interference.
5. Lord Justice Wilson and Lord Justice Laws agreed with Lord Justice Carnwath.

• Court of Appeal (Civil Division) — [2006] EWCA Civ 165: appeal from the High Court dismissed.
• High Court (Chancery Division) — Warren J construed the assignment in favour of the respondent and awarded interest.