Assets Recovery Agency v Szepietowski & Ors

A settlement deed must be construed objectively as a whole, having regard to its structure, express provisions and commercial context. Where a provision requires replacement security after the sale of charged properties, the scope of that security depends on the assets identified or naturally contemplated by the agreement. The court should not rewrite the bargain to address a later fall in property values or an unforeseen shortfall. Where the agreement distinguishes a family home from other secured properties and releases the home as part of a full and final settlement, that context may strongly indicate that the home was excluded from replacement security.

The claimant, formerly the Assets Recovery Agency and later the Serious Organised Crime Agency, had settled its civil recovery claim concerning a portfolio of properties with Mrs Susan Szepietowski and other defendants. Under the settlement, certain properties were vested in the Trustee for Civil Recovery, while others were released. Two properties subject to an RBS all-monies charge were subsequently sold before two additional charged properties had been sold.

The sale proceeds reduced the RBS debt. The dispute concerned paragraph 4.5 of the Settlement Deed, which required Mrs Szepietowski to grant a charge if RBS did not consent to releasing the sold properties. The central issue was whether that replacement charge was limited to the Additional Properties or could extend to Ashford House, the defendants’ family home.

1. Construction of paragraph 4.5. The provision required Mrs Szepietowski to grant SOCA a charge over her legal or beneficial interest in the Additional Properties, securing an amount equivalent to the reduction in the RBS debt resulting from the sale of Thames Street and Church Street. It did not require security over Ashford House or any other property.
2. The structure of paragraph 4, which dealt with the Additional Properties, supported that construction. Paragraph 4.7 expressly contemplated charges registered against those properties, including the bank charge and any charge under paragraph 4.5. If wider security had been intended, the parties would have identified the assets to be charged or provided machinery for selecting them.
3. The Consent Order and Settlement Deed drew a clear distinction between Ashford House and the other properties subject to the RBS charge. Ashford House was released as part of the full and final settlement, and the agreed debt figure relating to it appeared to exclude most, if not all, of the RBS debt. The court’s provisional view was that the settlement also ruled out a claim for security over Ashford House.
4. The compromise was property-based. The risk that the Additional Properties would later prove insufficient to discharge the RBS debt was therefore borne by SOCA. A subsequent downturn in the property market did not justify rewriting the parties’ agreement.
5. Section 60 of the Taxation of Chargeable Gains Act 1992 did not affect the construction. Any possible tax motivation for vesting the Additional Properties in the Trustee could not overcome the contractual indicators excluding Ashford House.
6. The Additional Properties were directed to be re-transferred to Mrs Szepietowski. She was then required immediately to grant SOCA a charge over the entirety of her interest in those properties, on terms to be agreed, with liberty to apply if agreement could not be reached.

The judgment records earlier applications in the same proceedings, including a judgment dated [2009] EWHC 344 (Ch), but no appellate decision is stated.