Skatteforvaltningen (The Danish Customs And Tax Administration) v Shah & Ors

For CPR 86.1, competing claims need not be claims of the same legal nature. A creditor’s claim to payment may compete with another claimant’s proprietary or security claim to the debt or its proceeds where satisfying one claim risks liability to the other.

A proprietary claim is not rendered contingent merely because its merits depend on a future trial. Where the claim asserts existing rights, it may engage the interpleader jurisdiction before judgment. The court should not summarily release disputed funds merely because the competing proprietary claim is complex.

The claimant, the Danish tax authority, brought extensive personal and proprietary claims arising from an alleged dividend-tax fraud. The applications concerned loan proceeds held by stakeholder defendants and claimed both by the Sanjay Shah defendants as repayment of loans and by the claimant as traceable proceeds subject to proprietary claims or an equitable charge.

The stakeholder defendants agreed to pay the funds into court. The court determined whether competing claims existed under CPR 86.1, whether the claims could be summarily resolved, and what procedure should govern any application for payment out and use of the funds for legal expenses.

1. The court held that the claims to the loan proceeds were competing claims for the purposes of CPR 86.1. The phrase “in respect of” has a wide meaning, and rival claims need not be identical in character. It is sufficient that compliance with one claim exposes the stakeholder to a risk of liability to the other, arising from a substantive dispute between the rival claimants.

2. The claimant asserted proprietary rights in the loans and their proceeds, together with an equitable charge. Those claims competed with the defendants’ asserted absolute entitlement to repayment. Payment to the defendants could expose the stakeholders to liability to the claimant.

3. The court explained ST Shipping and Transport Pte Ltd v Space Shipping Ltd (The Stealth) [2018] EWHC 156. That case concerned an attachment which had been discharged and which would have created a proprietary claim only if reinstated. It did not establish that a proprietary claim requiring determination at trial cannot be a competing claim. The present claim was said to replicate existing substantive rights through an institutional constructive trust.

4. The court followed the reasoning in Global Currency Exchange Network Limited v Osage I Limited [2019] 1 WLR 5868: a prospective proprietary claim may qualify even though a prior legal step is required. The court also rejected summary determination in favour of the Sanjay Shah defendants. The consent order preserved the parties’ substantive positions, and the merits of the claimant’s proprietary claims required trial.

5. Any payment-out application required a discretionary hearing addressing the principles summarised in Kea Investments Ltd v Watson [2020] EWHC 472 (Ch). The court had to consider whether the claimant had an arguable proprietary claim, whether the defendant had arguable grounds for claiming the money, whether alternative funds existed, and the overall balance of potential injustice. The parties were directed to seek an early hearing. Liability for stakeholder costs was reserved, while the Sanjay Shah defendants were presumptively liable for the claimant’s application costs.