Heifer International Ltd v Christiansen & Anor

Under section 3(5) of the Charging Orders Act 1979, the court has a discretion to discharge or vary a charging order. The discretion is not exercised lightly. The court must balance the interests of the property owner against those of the charge-holder.

A costs debt is not discharged merely because the debtor authorised payment from funds which might have been available, where no payment was actually made. An alleged breach of trust concerning those funds does not justify discharge where the applicable law, breach, and remedy remain unresolved.

The claimant sought discharge of a final charging order over its Surrey property. The charge secured a £45,000 costs order made in favour of the first and second defendants in earlier proceedings concerning the refurbishment of the property.

The claimant argued that funds held in Danish bank accounts had been paid out in breach of trust, and that the funds should therefore be treated as still available to satisfy the costs order. The defendants argued that the costs remained unpaid. The court also considered the effect of a Danish arbitral award and whether the alleged withdrawals had been unlawful or improper.

1. Discretion under section 3(5). Section 3(5) of the Charging Orders Act 1979 conferred a discretion to discharge or vary the charging order. That discretion was not to be exercised lightly. The relevant balance was between the interests of the party whose property was charged and those of the charge-holder.
2. No discharge of the costs debt. No payment had been made, either directly by the claimant or by authorised release from the Danish bank accounts, to satisfy the £45,000 costs order. The debt therefore remained outstanding. The claimant had also had an opportunity to argue at the hearing of the final charging order that the debt should be treated as paid. If it had failed to make that point then, it could not use the present application to obtain discharge on that basis.
3. Alleged breach of trust. It might be arguable under English law that the funds were subject to an implied or constructive trust and that the August 2007 payment was unauthorised. However, the proper law of the accounts might be Danish law, and it was unclear whether there had been a breach under that law or what remedy would follow. Even under English law, damages might be adequate, particularly if the payment discharged sums otherwise owed to the firm. These unresolved issues did not establish that the costs debt had been discharged.
4. Arbitration and outcome. The Danish arbitral award did not provide a sufficient basis for treating the costs order as satisfied. The claimant remained free to pursue an appropriate claim concerning any breach of trust or damages. The application to discharge the final charging order was dismissed. No order was made on the defendants’ application, and time for service of the defence was generally extended pending further order and the parties’ consideration of settlement.

Not stated in the judgment.