Crumpler & Anor v Candey Ltd (earlier appeal re monies in court)

The Court of Appeal held that money paid into court by a defendant as security for cross-undertakings and for security for costs remained the payer's property, subject to the claimant's security interest. The court relied on authority establishing that a payment into court creates an equitable security in favour of the claimant while the payer retains a proprietary interest (analogous to an equity of redemption). The effect was that Peak Hotels retained an existing asset in the sums paid into court and was therefore capable of creating a valid charge over that asset in favour of its solicitors under the Deed of Charge and Security. The court dismissed the liquidators' argument that payment into court divested the payer of all proprietary interest such that any later receipt on payment out could only be future property not capable of being charged.

Background and parties: The appeal arose from a directions application in Peak Hotels and Resorts Limited's liquidation. The appellants were the joint liquidators of Peak. The respondent was Candey Limited, solicitors who had acted for Peak and had been granted a Deed of Charge and Security purportedly charging inter alia monies in court.

Nature of the application / relief sought:

• The liquidators sought a declaration that the Deed of Charge did not create a valid proprietary security over two sums (US$10,000,000 and £1,648,000) paid out of court during Peak's liquidation because, they argued, Peak had lost any proprietary interest upon payment into court and therefore could not have charged that property before liquidation.

Procedural history: The appeal was from a High Court (Chancery) decision of His Honour Judge Davis-White QC ([2017] EWHC 1511 (Ch)). The appeal was heard by the Court of Appeal on 21 June 2018.

Issues framed:

1. Whether a payer of money into court retains a proprietary interest in that money such that it remains an existing asset capable of being charged prior to payment out.
2. If not, whether a purported charge over such money (or over the payer's right to receive it on payment out) can be valid and enforceable against the liquidators.

Court's reasoning: The court reviewed leading authorities (including Pearlberg v. May, the Gordon/Ford/Dessau line, Sherratt, Halvanon, Emmott and others). It concluded that the correct and principled position is that payment into court as security gives the claimant an equitable security interest while the payer retains a proprietary interest in the fund (comparable to an equity of redemption). The court regarded earlier dicta in Sherratt suggesting the payer 'parts outright with his money' as not forming part of that decision's ratio and inconsistent with binding authority such as Pearlberg and persuasive first instance authority such as Halvanon. Emmott (Court of Appeal) provided supportive obiter analysis. On that foundation the court held Peak retained property in the sums paid into court, so the prior Deed of Charge validly created a floating charge over them.

Subsidiary findings / practical implications: The court observed that the ultimate payment out of the fund depends on the court's exercise of discretion and that the claimant's security interest does not remove the payer's equitable proprietary interest. The decision emphasises that payment into court for security purposes typically creates a security arrangement rather than a transfer of beneficial ownership.

The Court of Appeal dismissed the liquidators' appeal. The court held that money paid into court as security for cross-undertakings and for security for costs remains the payer's property, subject to an equitable security interest in favour of the claimant; accordingly Peak had an existing proprietary interest in the sums paid into court and validly charged that interest to Candey by the Deed of Charge and Security.

Appeal from His Honour Judge Davis-White QC in the High Court (Chancery Division), Business and Property Courts, Insolvency and Companies List: [2017] EWHC 1511 (Ch). Appeal heard in the Court of Appeal (Civil Division) and disposed of by judgment reported at [2018] EWCA Civ 2256.