National Bank Trust v Yurov & Ors

Where mixed fungible assets are depleted, tracing may be used to assess how much of a co-owner’s property remains, even where the claimant has no proprietary interest and there is no wrongdoing trustee. Tracing supplies rebuttable presumptions rather than an invariably decisive answer. Evidence of the parties’ actual intention when payments were made may rebut those presumptions, but the evidential burden rests on the party asserting a disproportionate depletion. In the absence of convincing evidence, remaining fungible assets may be treated as continuing to be owned in the original proportions. Relief under the Insolvency Act 1986 requires identification of the transaction engaging the statutory power.

The claimant bank sought enforcement against bonds held in an account in the names of the second and fifth defendants. In earlier proceedings, the court had determined that 38% of the original fund was held by the fifth defendant on resulting trust for the second defendant, while 62% belonged beneficially to the fifth defendant.

The fund had been used for legal, living and other expenses, leaving bonds worth approximately £1.4 million. The fifth defendant contended that expenditure attributable mainly to the second defendant had exhausted his 38% share, leaving her as sole beneficial owner of the balance. The bank relied on tracing and sought a final charging order. The fifth defendant sought variation and discharge of a post-judgment worldwide freezing order.

The issues were beneficial ownership, possible relief under sections 423–425 of the Insolvency Act 1986, finalisation of the charging order, and variation of the freezing order.

1. Beneficial ownership. The bank’s tracing analysis was accepted. Tracing was available even though the bank had no proprietary claim and the case did not involve a wrongdoing trustee. It was a method of identifying how much of the second defendant’s property remained in the account. The tracing analysis created rebuttable presumptions and was not necessarily determinative.
2. The relevant intention was the parties’ intention when payments were made and when bonds were sold to raise cash. The fifth defendant’s evidence showed that, at the material time, she believed the fund was hers and intended to use her own property for joint expenses. That evidence did not establish a primary intention to deplete the second defendant’s share disproportionately.
3. The fifth defendant failed to rebut the presumptions. The alleged understanding that the second defendant’s money would be spent first was late, unsupported by documents, and lacked evidence from the second defendant or any independent witness. The retainer and invoices also indicated a joint approach to the litigation and its funding. The remaining bonds therefore continued to be owned in the original 38%/62% proportions.
4. Insolvency Act relief. The issue did not arise after the beneficial ownership finding. Had it arisen, relief under sections 423–425 would not have been granted on the case advanced. The transaction said to engage the statutory power had not been clearly identified at first, and the proposed reliance on knowledge had not been pursued or decided at trial. The court would not make the necessary factual leap.
5. The interim charging order over the 38% was made final. The fifth defendant’s application to vary and discharge the post-judgment worldwide freezing order was dismissed.

Not an appeal. The judgment records earlier proceedings before Mr Justice Bryan and subsequent applications for permission to appeal, but no appellate decision is stated.